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How Does the Global LNG Market Look in 2018?

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Pre-2020

The global natural gas market is expected to be flooded with LNG (liquefied natural gas) in 2018 and the following years. This trend is due to the rise in LNG supplies from major LNG-producing nations such as Australia (EWA), Qatar (QAT), Russia (RSX), and the US (SPY).

Australia’s LNG exports are expected to rise to 74 Mtpa (million tonnes per annum) during 2018–2019 as its major LNG projects come online. This includes Inpex Corp.’s Ichthys and Royal Dutch Shell’s Prelude projects.

US projects that are expected to come online in 2018 include Train 1 of Freeport, two trains of Dominion Energy’s (D) Dominion Cove LNG, and six trains of Kinder Morgan’s (KMI) Elba Island LNG.

Supply

The increase in supply is expected to result in the massive LNG surplus during the 2018–2019 period, as demand is expected to grow at a much slower pace. A recent IEA study forecast global LNG demand to grow 1.6% per year for the next five years, which is expected to drive incremental LNG supplies higher, as shown in the chart above.

The incremental LNG supplies would result in an increase in buyers’ power and put pressure on LNG prices. Cheniere Energy (LNG) is protected from fluctuation in LNG prices to a large extent, as 87% of the capacity from its seven trains is tied to long-term contracts.

However, the expected decline in LNG prices has resulted in buyers negotiating LNG contracts. This includes India’s Gail India, which is expected to start receiving commercial deliveries of LNG from Trains 4 at Sabine Pass from 2018.

After 2020

Cheniere Energy (LNG) expects the LNG market to tighten after 2020 due to insufficient FID on new projects. According to a recent investor presentation, “Long lead time to new supply means once the market is tight it will take 4+ years for supply to adjust.”

This forecast assumes an incremental growth in LNG demand. Cheniere Energy can take advantage of this situation with its two fully permitted trains with a capacity of 9 Mtpa, including Train 6 at Sabine Pass and Train 3 at Corpus Christi.

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