BAKU, Azerbaijan, Nov.21. Liquified natural gas (LNG) can surpass pipeline gas in global gas trade, Trend reports with reference to the long-term strategy of the Gas Exporting Countries Forum (GECF).
“Global gas trade has continued to expand to meet the stronger gas demand in major gas importing countries, particularly China, with LNG trade growing at a faster pace. Unlike pipeline gas deliveries, which are restricted by destination, LNG offers greater flexibility in supplying gas across all corners of the world. As such, there has been more investment in LNG export projects compared to pipeline gas export projects. In the short-to medium-term, the start-up of several new LNG export projects will result in LNG surpassing pipeline gas in global gas trade,” reads the document.
GECF notes that historically, global LNG trade was characterized by long-term oil-indexed contracts of more than 20 years between a buyer and seller.
“However, recently, there have been significant changes in LNG contracting based on shorter contract duration and new pricing mechanisms. Over the last five years, the average duration of new LNG contracts was around 15 years, with new contracts of 20 years or more accounting for a quarter of all the contracts signed during this period. This highlights buyers’ preference for shorter-term LNG contracts in the past few years. Although oil-indexation in new contracts was the dominant pricing mechanism, the level of the oil-indexed slope has declined sharply since 2017 to a historic low of around 10% in 2020-21. However, with the LNG market forecasted to remain tight through 2025, this trend may reverse to support the longer duration as well as the recovery in oil-indexed slopes in new LNG contracts.”
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