LNG sector challenged by depressed demand and falling prices
Published by Tom Mostyn,
Editorial Assistant
Tanks and Terminals,
The global LNG sector has been hit by supply overhang followed by COVID-19-induced economic slowdown and lower demand worldwide.
Haseeb Ahmed, Oil and Gas analyst at GlobalData, comments: “Due to the sharp fall in oil prices, spread between oil-indexed long-term LNG contracts and spot contracts have considerably reduced. This can make it challenging for LNG producers to meet their revenue targets. In addition, a rapid decline in gas demand is affecting financing of capital-intensive new liquefaction projects, leading to inordinate delays and capex reductions.”
To keep a check on spends, several operators are delaying their upcoming LNG projects. Operators are reducing their expenditures for 2020 as a measure to counter the impacts of COVID-19. Woodside Energy and ExxonMobil have resorted to downsizing their capex by 60% and 30%, respectively, for 2020. In the meantime, BP has pushed the timeline for its Tortue FLNG project from 2020 to 2023 in response to the COVID-19 impact. Similarly, Qatar Petroleum has also postponed the project timelines of its Ras Laffan North Field LNG terminal development by a year to 2025.
Ahmed concludes: “A silver lining amid all the chaos induced by the pandemic outbreak is increased opportunities for new entrants to the LNG sector. Global LNG oversupply, as well as low LNG prices, might encourage new countries and companies to start importing LNG, contributing to LNG industry growth. Sustained low LNG prices will encourage several gas-importing countries to switch from coal and oil to cleaner natural gas.”
Read the article online at: https://www.tanksterminals.com/terminals/04052020/lng-sector-challenged-by-depressed-demand-and-falling-prices/
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