All is not as it would seem in terms of liquefied natural gas (LNG) and its touted role of metaphoric savior of the US gas markets, according to the latest analysis just published by Bentek Energy, an analytics and forecasting unit of Platts. Platts is a leading global provider of energy and commodities information.
Global gas demand growth has flagged over the last year, rising by no more than 0.7 Bcf/d, the analysis “LNG Exports: Oasis or Mirage?” states, while at the same time 2.2 Bcf/d of new export capacity is expected to be added to the market by the end of 2015. Among a host of factors explored in the analysis report are:
Global baseload demand will increase by little more than 3.3 Bcf/d in 2016, according to Eclipse Energy, another of the analytics and forecasting units of Platts, whereas global supply is expected to increase by 4.3 Bcf/d, leaving the global market about 1 Bcf/d longer by yearend.
Five LNG export terminals are expected to be built in the US over the next five years, with combined liquefaction capacity of 10.16 Bcf/d.
When global spot prices fall below the marginal cost to deliver a US LNG cargo to market in Asia, Europe, a US capacity holder may forego its option to liquefy, thus coupling the Henry Hub price to global spot indices such as the Platts JKM™ (Japan/Korea Marker) and National Balancing Point (U.K. hub).
Japan, South Korea and China are expected to account for 40% of all gas demand growth in 2016 and 60% of aggregate global demand.
“As a result of oversupply of LNG in the global market, US export capacity holders are likely to operate without regard to their sunk cost tolling fees and deliver gas at a cost of feedstock plus transport plus margin,” said Ross Wyeno, senior energy analyst at Platts’ Bentek Energy.
Image: LNG offshore terminal/iStock