The creeping global LNG glut is turning trade flows upside down. Sellers are searching far and wide for someone to take their cargoes.
The biggest LNG conference in the world is happening right now in Perth, Australia. Once every three years, the industry gathers, and this time everyone is talking about the LNG oversupply situation.
The problem is a real one for Australia. By the end of this decade, it is expected to be the largest LNG exporter in the world ahead of Qatar and the US.
Four LNG megaprojects have started up in the last year and a bit. When all are up and running, they will add nearly 41mn t/yr of LNG capacity to the market. That is more than China and India’s combined total LNG imports last year.
We knew the glut was coming. We said so last September. We also said that it would come to Europe. Now the rest of the world agrees.
“Over 50pc of this additional volume will find its way into Europe, either directly, or displacing other swing suppliers which are currently delivering into Asia,” German utility Uniper said at the LNG 18 conference.
Europe has the LNG import capacity and gas markets to handle the glut. US LNG developer Cheniere Energy, South Korea’s Kogas, and Angola LNG have signed deals with European utilities to use their gas and LNG infrastructure, for this very reason. For more information, we discussed this in our recent LNG webinar.
“I expect there will be some spot sales going to Europe, which has had problems with gas supplies in the past as some of the gas pipelines into Europe have been turned off and this has made security of supply an issue. I think there is strong confidence that Australia is a secure supplier,” Western Australia premier Colin Barnett said at the same event.
The LNG glut will remain for a few years. No new LNG supplies are needed until 2023 until the market balances, delegates including ExxonMobil, Qatari producer Rasgas, Malaysia state oil firm Petronas, and Shell said.
Australian LNG has already made it to Egypt and Mexico. It’s only a matter of time before they come knocking on Europe’s door. (And don’t even talk about the US).