18-year-low prices for LNG piquing interest in new parts of the world
LNG prices have suffered a fate similar to oil, with most contracts linked to the price of crude oil now worth substantially less than they were two years ago. This, along with faltering demand in Asia, has called into question the economics of many major LNG projects, but there is a silver lining: 18-year-low prices are attracting new customers.
Speaking at an industry conference in Perth, market insiders said current low prices are luring new importers and will encourage substitution, reports CNBC.
South Africa and South America, for instance, are looking at importing LNG to help alleviate energy shortages, said Graeme Buthune, CEO of consulting firm EnergyQuest.
“Cleaner and greener is part of it; lower prices are part of it. The other important part of it is also energy security,” he added.
“We are seeing countries with a long…tradition in consuming and producing coal moving to natural gas,” said the chairman of the French Gas Association, Jerome Ferrier, at the same event.
LNG set to play an increasingly important role in North America
In its 2016 Energy Outlook – Focus on North America, BP (ticker: BP) said natural gas will become the main source of power generation over the next 20 years. Fossil fuels will decline in terms of overall use, making up an expected 78% of the energy mix by 2035, but natural gas will overtake oil as the leading fuel source around 2023.
“In North America, natural gas (and renewables) [sic] displace coal in power generation,” said BP in the report. “The share of gas in power generation reaches 36% by 2035, compared to 22% today. Gas in industry has a 46% market share by 2035. Gas in transport reaches a 4% market share by 2035.”
The increased use of natural gas will also make LNG increasingly important the company said in the outlook. LNG will allow the U.S. to become a net exporter of natural gas by the end of the decade.
North America as a whole is expected to export nearly 18 Bcf/d by 2035. North America’s share of global LNG exports will peak around 2030 based on BP’s forecast at nearly 30%. North American LNG exports will still account for a quarter of global LNG trade by 2035 as markets in Asia and Europe continue to look for more sources to meet their energy demand.
