Global LNG supply crunch to ease towards end of decade: Industry execs

SINGAPORE – The global liquefied natural gas (LNG) supply crunch triggered by the shockwaves from the Russia-Ukraine war is expected to drag out over the next few years before supply stabilises sometime towards the end of the decade, according to senior industry executives gathered in Singapore for an annual conference on Thursday (July 7).

Natural gas demand has soared globally, with European countries seeking to wean themselves off Russian energy after Moscow invaded Ukraine on Feb 24.

Europe has historically relied on Russia for around 40 per cent of its natural gas, most of which is delivered through pipelines.

But since the invasion, a Western-led alliance has put in place wide-ranging sanctions targeting Moscow’s energy exports – including crude oil, diesel and piped gas – forcing European buyers to scour the world for alternatives.

Speaking during a panel discussion at the 12th Asia LNG Summit held at the Shangri-La hotel in Singapore, Mr Andrew Walker, vice-president of strategy at Cheniere Marketing, a unit of top US LNG exporter Cheniere Energy, said he was expecting fresh supply supported by new projects in the United States and Qatar to hit the market sometime around 2026 through 2027, helping to set the market back in balance.

Late last month, Cheniere Energy announced an US$8 billion ($11.2 billion) expansion of its plant at Corpus Christi, Texas, and signalled further expansions could be on the horizon.

Mr Walker said more of such projects, not just by his company but by others based in the US, would likely be announced down the road spurred on by growing demand for long-term purchase agreements which make up about 90 percent of Cheniere Energy’s portfolio.

He added that demand for longer-term contracts was growing as it provides more security for buyers and mitigates the volatility in the spot market.

“The much-rumoured death of the long term contract that has been discussed over the past few years has turned out not to be correct,” he said.

“The volatility around prices is very debilitating, not just for the trade but also for customers, and from our perspective, which is the perspective of our customers, we are seeing them run to the safe haven of long term structured deals.”

But Mr Akshay Kumar, managing director and chief executive of Petronet, India’s top gas importer, who was also a panellist at the conference, said that global crude oil benchmarks would need to stabilise at around US$70 to US$80 a barrel for his company to consider expanding the volume of LNG it contracted on long term deals.

India, along with a number of sovereign buyers in Asia including Singapore, buys its natural gas on oil-linked contracts and is now grappling with high volatility and increased electricity prices.

Mr Singh said that whipsawing prices and sharp spikes in the short term was making LNG less affordable for consumers. He added that some of the country’s gas fired power plants were not operational because the grid was not able to supply customers due to high LNG prices.