BAKU, Azerbaijan, June 3
By Leman Zeynalova – Trend:
The global liquefied natural gas (LNG) industry is about to face its first seasonal demand contraction since 2012, Trend reports citing Wood Mackenzie.
The company estimates that the LNG demand in summer 2020 expected to fall 2.7 percent or 3 million tonnes (Mt) year-on-year.
Wood Mackenzie research director Robert Sims believes that the coming winter season (2020-21) could see a modest 5 Mt improvement in global LNG demand compared to the previous winter season.
“Pricing dynamics between both seasons are also likely to be similar, with the cross-basin spread set by the economics of US LNG. There could be some downside risk to Asian prices this winter if buyers lift some of the deferred volumes from this summer. In general, a return to stronger growth is not expected until mid-2021,” said the expert.
He pointed out that lockdowns across Europe have been every bit as severe as Asia, but the total impact on gas demand is expected to be proportionally less due to the smaller share of gas used in the industrial sector, as well as the resilience of gas burn in the power sector, and largely unaffected demand from residential use.
Fitch Solutions expects 2020 will mark the nadir for global LNG prices, amid a deepening glut in the global LNG market and given the large declines in crude oil and gas hub prices.
“The disruptions arising from responses to the global Covid-19 pandemic also look set to add to the former, as demand and sentiment across major markets endure substantial hits,” the company believes.
The International Gas Union (IGU) says that the first quarter has proven to be very challenging for natural gas and LNG producers, as historically low gas prices have prevailed throughout the winter season.
“First, the increase in LNG exports combined with a mild winter across the Northern Hemisphere led to a counter-cyclical drop in international gas prices. The bearish tone continued throughout February and March as markets around the world started to announce lockdowns in order to control the spread of the Covid-19 virus,” said IGU.
Despite the impact of COVID-19 outbreak on the global economy and energy demand, LNG supplies are poised to continue climbing this year, IGU said.
“The record volume of sanctioned liquefaction projects is underpinned by the expectation of growing LNG demand globally, creating the need for additional liquefaction capacity,” IGU said. The group also noted that this would lead to increasing competition for engineering, procurement and construction contracts “as project developers aim to enter the market by the mid-2020s in order to capture growing demand.”
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