LNG demand growth to slow in coming years
Baku, Azerbaijan, July 29
By Leman Zeynalova - Trend:
The overall pace of growth of liquefied natural gas (LNG) will slow in coming years, Trend reports with reference to Fitch Solutions Macro Research (a unit of Fitch Group).
“Lower prices and the rising availability of supply has driven aggressive growth in LNG demand. Structurally, the outlook remains positive for LNG.
Expanding populations and rising economic activity in emerging markets will continue to grow the world's energy needs. The policy backdrop is also highly
favourable to gas, as governments take steps to tackle greenhouse gas emissions and urban air pollution. The concentration of energy demand growth in markets which have inadequate domestic gas supplies and are often lacking in import pipeline infrastructure tends to favour LNG, with LNG trade set to grow at a substantially faster pace than piped gas. Nevertheless, we forecast the overall pace of growth to slow; China is a significant player here but is not the only cause of the slowdown. In general, the size of new market entrants is shrinking, and we do not believe that these buyers will be able to sustain the current level of growth,” reads a report released by the company.
Fitch Solutions believes that a rise in the price of contract LNG will also begin to strain demand in a number of markets.
“Demand growth, while still strong, has shown signs of a slowdown in H119. Given that LNG storage capacity is limited (and storage economics poor), supply must be cleared by the market; as such, we measure the weakness in demand in terms of spot price levels, regional price spreads and global trade flows,” said the company.
Europe - with its liquid gas markets, flexible pipeline supplies and relatively high coal-to-gas switching prices - remains the global gas sink, clearing surplus supplies, according to the report.
“In the first four months of the year, Europe took in around 25 percent of imports, up from 14 percent in the same period last year. Asia, which is the global engine for growth, took in 70 percent down from 8 percent previously. The Asian winter price premium collapsed over 2018 /2019 and spot price levels are languishing at multi-year lows. Asian demand growth is slowing, most markedly in China and this is impacting the strength of demand globally, in line with our expectations. Our view has also been supported by a relatively mild winter, which has depressed consumption and storage reinjection needs,” said Fitch Solutions.
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