Australia’s resources company BHP expects ample global liquefied natural gas (LNG) supply until mid-2020s, with considerable overflow from Asia to Europe at times.
“Despite the strong LNG demand growth that we project, current and committed capacity is likely to amply supply the market until the middle of this decade,” BHP said this week.
The mining group said in its “generally constructive” outlook that new liquefaction projects will be required beyond the mid-2020s, Kallanish Energy reports.
A large amount of additional capacity has entered the market recently, with the overflow from incomplete ramp-ups influencing fundamentals in 2020. The global LNG market was already facing a supply glut even before the “Great lockdown” and prices collapsed on the double whammy.
Yet, the actual production of these new and upcoming facilities will be lower than their nameplate capacity. BHP sees these slower ramp-ups as “a sensible response to the deeply oversupplied market.”
In the Jan-June period, the Japan-Korea Marker (JMC) benchmark for Asian LNG prices averaged $2.89 per million British thermal units (MmBtu) DES Japan. This is 45% lower than the prior six months, with the price ranging from $1.83 to $5.35/MmBtu.
The outlook for price and demand growth are highly tied to “key uncertainties” such as the Chinese energy mix policies and the scale of competing supply of indigenous and pipeline gas; investments level in Indian new gas infrastructure; timing and scale of nuclear restarts in Japan; and energy mix policies in South Korea.
BHP also expects the amount of Russian pipeline gas supplied to Europe to represent a “swing factor” in the outlook.
“In the longer term, we see LNG as a commodity that has an opportunity to operate under inducement economics, at times, given the combination of systematic base decline and an attractive demand trajectory,” the group said.
It added that the global gas market “is big and getting bigger” – and the LNG share of the market could almost double to around one-fifth by 2050.
But BHP said only assets that are advantaged by proximity to existing infrastructure, or customers, or both, are attractive to the company.
This post appeared first on Kallanish Energy News.