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Title : LNG: Things Are Changing -- March 14, 2018
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LNG: Things Are Changing -- March 14, 2018

I began the blog because of the Bakken, an oily play. I knew maybe 1% of what was going on in the Bakken, and today, I might know 1.5%. When I started the blog, I knew even less about natural gas and still barely understand much of that sector.

The shale oil story played out more staggering than I ever would have guessed, but even more surprising is how the natural gas story played out.

Now this, from an article over at oilprice.com: the power has shifted in LNG markets. Some data points:

• LNG used to depend on long-term (20- and 30-year contracts); no longer -- that has been stated by others also; I believe I recall that LNG contracts will now be much like crude oil contracts, 6-month contracts
• this epic change gives consumers (China, Japan, South Korea) more power

The quandary for LNG customers who had to enter into long-term 20 and even 30-year off-take agreements was manifold since they were mostly anti-competitive in nature and, worse yet, whose terms were mostly secretive with a problematic corresponding lack of transparency for the industry. Yet, with a somewhat limited supply of the super-cooled fuel until around the start of 2015, buyers had little choice but to comply.

• experts suggest that continued expansion of LNG supply will be needed to meet demand that is forecast to grow at an average of 1.6% per year until 2040
• hings can change drastically in just a couple of years. Since 2016, with Australia now poised to have as many as ten major LNG export projects operational, followed by the U.S. which now has two export projects on-stream and will have five export projects operational by the end of the decade, the market has switched from being stretched thin to being over supplied – all good news for buyers thereby changing the rules of the game. This is a development that has been hard for LNG exporters to accept.

The LNG producers want long-term contracts. This writer, at the linked article, suggests that is not going to happen. I believe I've read that elsewhere.

As LNG markets continue to be well lubricated by Australia, U.S. and Russia, the fuel will increasingly trade more like a true commodity, similar in some aspects as iron oil and crude oil.

So, on the consuming side:

• China
• South Korea
• Japan

On the supply side:

• the US
• Russia
• Australia
  note: Qatar not mentioned; there was a story yesterday (not posted) that Qatar's role in global LNG is decreasing

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