Gas industry sees strong demand post-Covid, LNG shortfall by mid-decade
[MELBOURNE] The gas industry sees no change to the strong long-run outlook for demand following the Covid-19 crisis, but expects a supply shortfall in the next four years as the pandemic lockdowns and oil price collapse lead to delays on gas projects.
Gas producers, buyers, liquefied natural gas (LNG) developers and a major contractor said in the long run the fuel will be needed to back up wind and solar power, replace coal-fired power, and produce hydrogen globally.
"We see the need for substantial investment in new projects and new liquefaction," Exxon Mobil Corp's Australia chairman Nathan Fay said at Credit Suisse's annual Australian Energy Conference.
However, lingering uncertainty following a crash in LNG prices to record lows this year below US$2 per million British thermal units (mmBtu) means only the lowest cost LNG projects will go ahead, major producers said.
More than 140 million tonnes of projects worldwide have been deferred. In Australia and Papua New Guinea alone, five are on hold - Exxon's expansion of PNG LNG twinned with Total's Papua LNG, Woodside Petroleum's Scarborough and Browse, and Santos Ltd's Barossa.
"It's everything to play for - so a very bullish outlook on gas," said Martin Houston, vice-chairman of US LNG developer Tellurian, which recently deferred a final investment decision on its US Driftwood LNG project to 2021.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Japan's Chiyoda, a major contractor to LNG projects, said work has largely dried up and there would need to be stability in the market before developers move ahead with projects.
"To be perfectly honest, we don't see any green shoots right now," said Chiyoda Oceania's president Andrew Tan.
Royal Dutch Shell sees short-term concerns weighing on everyone's decisions about new projects.
"I'm sure all companies, all operators or producers across the globe are going to be focused on that affordability question just because of the uncertainty they see in the macro markets," said Shell Australia chair Tony Nunan.
Research firm Rystad Energy said with gas prices around the world still trading near US$2 per mmBtu, LNG developers with all but the lowest costs will hold off on new projects.
"But that will again cause a shortfall for the LNG market four or five years down the road," Rystad's head of analysis, Per Magnus Nysveen told the conference.
REUTERS
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Energy & Commodities
India's Vedanta misses Q4 profit estimates on lower prices
BHP targets Anglo American in bid valuing miner at US$39 billion
China's Sinopec charts global expansion with refinery in rival India's backyard
Gold trades in tight range as market focuses on US economic data
Oil settles lower as US business activity cools, concerns over Middle East ease
Orsted says Taiwan wind project to power TSMC on track for 2025 finish