Goldman Sachs has revised down its predictions of global LNG demand, from 6 to 5 per cent growth on an annual compound basis by 2020, and from 5 to 4 per cent by 2025. As a result they expect that LNG projects in Africa, Australia, and Canada will be delayed or scrapped.
According to Goldman Sachs, even the largest producer – USA – will not be spared from the pull back, having to compete with the global LNG export leaders: Qatar and Australia. It’s expected that the U.S. fuel will be quite competitive as the increased output form the shale formations such at the Marcellus, has sent gas prices tumbling down 69 percent from their peak in 2008, but it is not certain whether the demand for LNG will hold strong. Goldman Sachs points out that factors such as he restart of nuclear reactors in Japan, China’s success in shale-gas exploration and production, and economic conditions in the Association of Southeast Asian Nations (ASEAN), may slow the demand.
When it comes to price competitiveness it is not the U.S. that will be the winner, according to Goldman Sachs, but rather Papua New Guinea and East Africa. “Outside of the U.S., we believe Papua New Guinea and East Africa may be the best placed regions to compete on cost competitiveness,” Goldman said. “Given the industry’s renewed focus on capital discipline in recent times, we are observing a number of high-cost LNG projects deprioritized in the investment queue by major companies such as Chevron, Royal Dutch Shell, BG Group, ExxonMobil.”
The bank expects strong demand growth in Asia to be led by China and ASEAN nations, with modest growth from India, South Korea and Japan.
“More than 20 percent of Japan’s LNG future import prices are driven by Henry Hub gas prices,” Goldman said, referring to the delivery point for U.S. natural gas futures.
China might be a major importer of LNG, as it switches to gas from more environmentally dangerous fuels like coal, but gas-fired power generation capacity is not a high priority in China given the lack of competitively priced supply compared with other feedstock, Goldman said.
LNG demand in Thailand, Singapore, Philippines, Indonesia, and Vietnam will continue to grow and reach a combined 42 million tons-per-year by 2025, according to Goldman.
“Traditionally an LNG exporting region from Indonesia Malaysia and Brunei, ASEAN has emerged as a large demand center due to strong economic growth, urbanization, and declining local gas supplies,” Wiseman said. “In many cases, LNG is reducing fuel costs initially, displacing oil consumption or more expensive pipeline gas.”
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