Global LNG markets showing unexpected resilience

Supplies are actually much tighter now, she said, than anyone would have predicted 2 years ago as the world headed into recession and several supply projects were about to start up.

Behind this phenomenon are several forces, she said, chief among them quick recovery from recession by the major global LNG markets, emergence of several new LNG markets, and increased demand spawned by unusual weather patterns in Europe and Asia.

Spomer said traditional and large markets in South Korea, Japan, and Taiwan recovered quickly from the 2008 global financial crisis. Demand in Spain also bottomed out.

Accompanying this recovery, she said, was the emergence of several new markets, including Brazil, Argentina, Chile, and Kuwait. Also figuring in new demand was the steady growth of Chinese terminal capacity to meet surging natural gas demand.

These trends combined to absorb much of the new LNG supply that began to flow into global trading in 2009. Augmenting this demand last year were unexpected weather patterns in Europe and Asia. Winter weather 2009-10 in both regions was much more severe than predicted; summer weather in Asia was considerably hotter and drier than expected, said Spomer.

In the midst of these events, Qatar unofficially effected “management of supply” by removing 1.5 bcfd of LNG supply in 2009 to conduct maintenance on some of its production plants.

All of this, she said, reflects the ability of the global LNG market to balance itself.

The future
Looking ahead, Spomer said as much as 3 bcfd of supply for 2011 is largely unspoken for, but that over 2011-14, there is much more tightness indicated.

And if we look for the “next Qatar” to emerge, Spomer believes that’s likely to be Australia, although the supply sources there are much more fragmented and less tightly controlled than in Qatar. She noted BG Group’s involvement in the first of several projects to produce LNG from coalseam gas production in northeast Australia.

One “wild card” in this view of the future is North America’s development of shale gas. Spomer believes that natural gas from North America possesses unique attributes—physical availability, delinkage from oil prices, among them—that will make that gas as LNG play a pivotal role in global LNG supply.

The other “wild card” element, she said, is Iran, which has already begun building LNG storage tanks for the Iran LNG project. Some markets, especially China, certainly hope Iran joins the ranks of global LNG suppliers.