Madrid

IT'S a tough time for liquefied natural gas. Demand is weak and the market looks oversupplied. So why is oil and gas major Royal Dutch Shell doubling down on LNG by buying its smaller rival BG Group for a headline US$70 billion? Adding BG would give Shell just under a fifth of the global LNG market, twice the next private competitor. It would join the likes of Qatar in the LNG top flight.

About 10 per cent of the world's gas supply is delivered in the LNG network. Asia dominates the demand side of the equation but overall deliveries have been effectively flat for the past three years. Asian spot prices have also halved, exacerbated by the falling price of crude. Meanwhile, 2015 will see the biggest surge in supply since 2011, according to Merrill Lynch estimates, with projects coming on stream in Australia and the United States.