Low LNG prices=Less Future Investment

Low LNG prices=Less Future Investment

September 20, 2017 | NewsRoomGnome | news

Because of the present overcapacity, global prices for LNG are just too low right now to send the price signals needed for investments into more liquefaction, say experts at a conference in Japan. And that means the industry could see a shortfall in a few years, according to an article on Reuters.

That means there may not be enough LNG for countries like Japan, which is the world’s biggest LNG buyer.

To avoid a shortfall, speakers like Total SA Chairman and Chief Executive Office Patrick Pouyanne called for more investment into LNG in the future, but investments in such projects can run in the billions.

LNG projects typically require billions of dollars of investment over many years of development. The industry has usually relied on long-term contracts linked to oil prices to ensure producers can get financing on favorable terms.

Increased competition among LNG suppliers, explains the piece, has resulted in buyers seeking better prices. The article notes,
“Spot LNG prices in Asia were at more than $20 per million British thermal units (mmBtu) in 2014, but with the more recent surplus they are now trading at less than $6 per mmBtu.”
According to one expert, a sweet spot in pricing of between $7 and $8 would stimulate investment into new projects.