The World’s Top LNG Producer Is In Trouble

[Tom Kirkman + 8,860]

Back around 2016, on the now defunct Oilpro forum, I made a whole series of comments, outlining my projection that the global glut of LNG would persist until around 2022 or 2023.  I listed out in excruciating, long-winded detail the reasoning for my opinion.  Old timers from that old Oilpro forum may recall my ad nauseum comments about the persistent global overproduction of LNG.  I attached charts, and blathered on endlessly about too much LNG for years to come.  I specifically called out Cheniere Energy in the U.S. as needlessly exacerbating the global LNG supply glut.  @Dennis Coyne @William Edwards @Douglas Buckland may be a few of those from the old Oilpro forum who might possibly recall my endless comments projecting a global LNG glut till around 2022 / 2023.

For a number of years now, Qatar has jealously planned to retake from Australia the crown of the world's largest LNG exporter, with Qatar planning to increase by around 40% its already massive LNG production.

This week, Qatar's several years long plans to significantly increase its LNG production capacity has hit a snag, namely a drop in global LNG demand due to fears over Coronavirus.

Looks like I may need to finally change my old long-term opinion regarding the general time frame of 2022 / 2023 for LNG to flip from global oversupply to global undersupply, and extend it a couple years out.

 

The World’s Top LNG Producer Is In Trouble

Global LNG markets are struggling with a glut of unprecedented levels.

International expansion in Australia, Qatar, Mozambique and Egypt, combined with a continuously strong US shale gas export drive, is pushing down prices further. Analysts have warned before that a possible LNG glut could end in tears, but nobody was expecting that the market would also be hit by a demand side shock such as China’s coronavirus. The last couple of weeks, major LNG export cargoes to China have been diverted to other clients or are still looking for a destination in an already woefully oversupplied market.

Major LNG producers such as Qatar or Egypt are feeling the pain already. During Egypt’s EGYPS2020, a major oil and gas conference, participants showed concern about the imminent future of the East Med gas hub, as new LNG export contracts still have not been signed and asking prices are unlikely to be met. 

Today’s announcement that Qatar has delayed its choice of Western partners for the world’s largest liquefied natural gas (LNG) project by several months isn’t going unnoticed. Without direct statements by Qatar Petroleum, sources have stated that the delay decision has been made based on current market fundamentals and the still unclear impact of the Corona virus. Qatar has been fighting an uphill battle as the market has been glutted by US shale gas exports and a drop in Chinese demand.  ...

 

... For Arab producers, especially Qatar, Algeria or Egypt, the future is uncertain. New gas discoveries will need to be monetized to support economic growth and diversification plans. For Qatar current expansion plans are needed, not only for new exports but also to keep the international investors and operators interested in the success story of Qatari LNG. Algeria at the same time is looking at other routes to get additional cash to prop up its fledgling economy the coming years. Egypt’s Energy Hub strategy, in cooperation with Cyprus and Israel, is a matter of life or death. International cooperation and investment strategies are needed to the regional economy going. Without markets or clients, however, all will be put on ice, as no investor or IOC will be willing to spent another $10 billion on a possible new 8 million tons LNG train. In Qatar’s case, the planned expansion is slated to cost around $60 billion.

All eyes are currently on China, as the Asian giant has accounted for 40% of the global growth in LNG demand since 2015. Strategies were decided on demand projections for China to exceed 82 million tons per year by 2023. The same was expected, at lower volumes, for India and possibly other areas in Asia and even Europe. The current slump and the coronavirus effect has put all in doubt. A main concern will be that the LNG glut spirals out of control, pushing major operators over the edge too.

[Tom Kirkman + 8,860]

On 6/25/2018 at 3:07 AM, Tom Kirkman said:

Arrrrrggghhhh.  My frustration that the old Oilpro forum is gone, along with all my comments.  In 2016, I wrote hundreds of comments about the impending global LNG glut.

Anyway, found one of my old comments on a Canadian blog.  I have quite a few longwinded comments in the following thread that blog, here is a relevant one:

Does It Matter That The BC Liberal Government Denied Petronas' Intention To Sell PNWLNG Before...Petronas did?

• 
  Tom Kirkman11:48 pm, October 05, 2016

  @ Grant G
  
  No worries, we have different views on recovery of LNG. I still tend to think the PNW LNG project is economically viable for Petronas in the long term (not the short term).
  
  For Canadians, not so much. The benefits promised by Canadian politicians to Canadian locals are laughable to me. Again, Canadians got played. Look at what happened to Australian LNG projects, when prices crashed. Lots of layoffs, and some LNG projects may never recover their costs.
  
  Agreed about the 40% increase in global LNG before 2020. But my view is still that global demand should catch up to global supply by around 2022. Obviously, I could be wrong about the future.  ...

 

[Gerry Maddoux + 3,627]

This viral epidemic is turning into a grave humanitarian crisis that is more redolent of past sins than anyone has outlined. It would appear (from the paltry statistics coming out) that while healthy young people are at very low risk of getting very ill, smokers and those exposed to high-level industrial pollution are at high risk. The new moniker could easily be, "Damaged Lung Viral Syndrome." 

Whatever happens, the Chinese are collating the data. If this has become obvious to me, you can bet that their epidemiology department is reporting back to Xi. All those hundreds of tiny coal-fired utility plants that Xi was building? I suspect they're toast. 

The only good to come from the conflation of exceptionally cheap LNG and the damaged lung viral syndrome may be to point the way to salvation: cut down on industrial pollution, stop smoking. Until now, all those photos showing coal-fired utility plant electricity being used to charge EV's were just funny. Now they're serious.

It'll take a while but any country that can build huge hospitals in a week can quickly remedy the situation. My prediction is that when their data-collectors finish, there will be a dramatic switch to LNG. That is, after all, Putin's push in shipping Yamal Peninsula LNG through the Northern Sea Route.