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LNG supply & demand-IV: "Mini glut" in LNG will be short lived, according to new projections
Feb 20: How does one ameliorate a situation where there is "low" Asian demand?
The main drivers for higher demand growth relative to the ‘low demand scenario’ are:
--Policy-supported switching to gas from coal in China and India for air quality and possibly CO2 reduction reasons.
--A slower pace of nuclear restart and renewables implementation in Japan.
--Higher power demand growth and a commitment to phase out nuclear in Taiwan.
--Faster decline rates of domestic gas production, requiring accelerated LNG imports in Pakistan, Thailand, Bangladesh, Malaysia, Indonesia and Vietnam.
8Given the less than firm commitment to the growth of gas in many Asian country energy policies, future LNG price levels will be important. While the lack of transparent competitive energy markets in most Asian countries generally blunts the immediate impact of LNG and gas prices on demand, price will certainly influence policy and prolonged periods (2 to 3 years) of high LNG prices would depress LNG demand growth, as it did in the aftermath of the hike in oil-indexed and spot LNG prices from 2011 onwards.
8As predicted here, there is likely to be a ‘mini-glut’ in 2019 and 2020 which would result in depressed European hub and Asian spot LNG prices but for a much shorter period than anticipated earlier, with the market cleared in 2019 and 2020 probably without the need to curtail US LNG exports.
8Given the typical lead time from FID to first LNG cargo of 5 years, upside on the global LNG supply picture from this point of view is limited and would be confined to:
8Faster than anticipated commissioning periods for existing projects coming onstream over the next five years,
8The successful completion of any new Floating LNG liquefaction projects, whose lead-time might be shorter.
8The successful development of the offshore Egypt Zohr field which has the possibility of negating Egypt’s LNG import requirement, allowing a resumption of LNG exports by around 2020.
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