Global LNG market stable for this winter, but there will be more volatility down the road
Energize Weekly, November 22, 2023
Ample gas inventories in the U.S. and Europe and increased liquified natural gas (LNG) export and import capacity will likely meet global needs this winter, but growing demand over the next decade could lead to persistent market volatility, according to market analyses.
“Expanded global LNG export and import capacity will make more natural gas available this winter season,” the U.S. Energy Information Administration (EIA) said. “We expect approximately four billion cubic feet per day (Bcf/d) of additional and returning LNG export capacity to be available during winter 2023-24.”
The growing worldwide demand, however, will continue to put pressure on the LNG market, creating persistent volatility as the market tries to stabilize after 2025, according to Massimo Di Odoarado, Wood Mackenzie vice president for gas and LNG research.
The LNG sector, Wood McKenzie estimates, will need 90 million tons a year of new supply by 2035.
“There is no immediate cure as most supply under construction will not be available until at least 2026,” Di Odoardo told Wood Mackenzie’s Gas, LNG and the Future of Energy 2023 conference in London.
“As a result, buyers still face some years of high – and volatile – prices before the next wave of LNG supply rebalances the market and improves affordability” Di Odoarado said.
North American LNG export capacity is set to more than double to 24.3 Bcf/d by 2027 with 10 new projects across Canada, Mexico, and the U.S., according to EIA.
Canada and Mexico are opening their first export terminals with 2.1 Bcf/d and 1.1 Bcf/d of capacity respectively. The U.S. is adding five new projects with another 9.7 Bcf/d in capacity. In 2022, the U.S. had 10.6 Bcf/d of export capacity.
Developers have proposed an additional three LNG export projects for Mexico’s west coast, with a combined export capacity of more than 2.7 Bcf/d. These projects would use low-cost natural gas imported from the U.S.
At the same time, European countries are rapidly expanding their ability to import LNG. In Germany operators fast-tracked construction of regassification plants using floating units.
Three terminals went into operation in 2023 with three more expected to go online by the end of the year for a total of 3.7 Bcf/d, the EIA said.
In the rest of Europe, “eleven other countries will each add between 0.1 Bcf/d and 0.7 Bcf/d of new or expanded regasification capacity for a combined 4.9 Bcf/d of additions”, the EIA added. “Cyprus is also expected to start importing LNG in 2024.”
Asia, the traditional major market for LNG will see demand increase two-fold by 2030, led by China and several other emerging markets in the region, according to Wood Mackenzie.
It will take years to find some measure of equilibrium as new export capacity comes online swelling the market and depressing prices but then potentially swinging higher due cold winters, geopolitical events, and increasing demand.
“The global gas market has staged a remarkable recovery since Russia’s invasion of Ukraine in early 2022 but remains easily spooked,” Di Odoardo said. “The conflict in Israel/Gaza, possible pipeline sabotage in the Baltics, and the threat of strike action at Australian LNG facilities all pushed spot prices up 35 percent through October.”
