LNG: a decade of oversupply

Toil ahead for oil, but expect double trouble for LNG, Angela Macdonald-Smith, Energy Reporter, Sydney Morning Herald, December 7, 2014

The crude oil market is seen as being in dire straits, but liquefied natural gas is much worse, according to experts.

Hanging as a dark cloud over the market for the next several years are large volumes of LNG from committed US export projects that have firm sales contracts but have yet to be sold to end users.

Consultancy FGE says between 25 million and 35 million tonnes of the 65 million tonnes a year of US LNG export capacity under construction has been sold to “middlemen”, traders or portfolio LNG players such as BG Group or Mitsubishi, which still need to sell the gas on.

“Portfolio sellers and traders are not end users: they must find buyers,” FGE founder Fereidun Fesharaki says.

In addition, about one-third of Qatar’s export LNG volumes are unsold…

That means about 70 million tonnes a year of LNG still needs a buyer, which will weigh on the oversupplied Asian market potentially through to the mid-2020s, the consultancy says. Dr Fesharaki describes those holding the contracts as “desperate sellers” that will provide stiff competition for producers seeking customers for new projects…

Asian LNG market to enter deeper glut as demand falters, supplies soar, Reuters, December 3, 2017:

  • Demand in Japan, South Korea and China stalls
  • Demand from new importers not enough to meet soaring supplies
  • Asian spot LNG prices to fall below $5/mmBtu in 2016 – analyst

Asia’s liquefied natural gas (LNG) glut is set to deepen in 2016 as long-planned new production comes to the market just as demand from top buyers Japan and South Korea as well as China wanes.

While analysts say that new consumer demand may offset dwindling use from established buyers, new supplies will outweigh overall orders, resulting in a low gas price outlook for years to come.

“From having been an import basin, Asia will next year be going to have excess supplies and worse so in 2017,” said David Hewitt, co-head of global oil and gas equity research at Credit Suisse.

…Hewitt said he expected Asian LNG spot to fall to “eye-watering low” levels of below $5 per million British thermal units (mmBtu) in early 2016 and to hit a low of $4 during the year.

Because of the emerging glut, Asian spot LNG prices LNG-AS have already plummeted by almost two-thirds since 2014 to around $7.30 per mmBtu…

Natural Gas
WTI Crude Oil

Categories: LNG, Natural Gas

12 replies »

  1. In other words: “The only way BC will get an LNG export industry is if the government covers any losses and gives away the product.”


  2. You mean Christy Clark had it wrong when she promised an LNG paradise free of debt and buckets of money in a ” heritage fund ” ? Shocking. The only thing that surprises me is how many people bought her brand of obvious BS in the last election. On the up side, she says that Fed's plans to reform the senate will only make things worse. So, things should be looking up in the Senate.


  3. It seems the LNG race has produced an over supply and those Countries that our Liberal government has been courting are not in a hurry to sign contracts for delivery.
    But despite this gloomy picture, the Conference Board is saying BC will be number one in Canada for growth: ” Get set for British Columbia to lead the country in economic growth in 2016 and 2017, according to the Conference Board of Canada latest quarterly Provincial Outlook, released
    December 7. “
    The Board goes on to say: ” A strong labour market, with job creation remaining steady in 2016 and 2017, will also boost consumer spending. “
    The article in today's BIV say's ” “Wood product manufacturing will get a boost this year from healthy U.S. home construction, while production of the non-combat vessels for the federal government is expected to ramp up at the Seaspan Shipyards in Vancouver,” the report said.

    The forecast includes approval of the $36 million Petronas LNG project.”


    I'm having a hard time accepting this jubilation when I read that the unemployment rate in Northern BC is up ( Alaskan Highway News ) but another article from BIV say's ” British Columbia gained almost 60,000 jobs in the 12 months to November, according to Statistics Canada data released December 4, giving the province the highest rate of job growth in the country over that period. “

    Who do you believe ?

    Guy in Victoria


  4. I seriously believe that the Christy Crew, had to know that LNG was extremely high risk from the get go. Its not about getting the best deal for “all” British Columbians. It never was. The concept of bait and switch was used during the last election. The bait, the LNG lottery, the switch..vote us in, and while we promise great things, the switch was the opposite, if not worse.
    The current senate hoopla by Christy, is just diversionary, keep the focus off our mess, and deflect to Ottawa.
    Too much manipulation is going on behind the scenes to let the public have any idea of the real “surprise” they have in store, for us “minions”. The sheeple of BC are about to get an increase in hydro and other energy costs, in order to “pay off” the IPP, site c, and LNG supporters behind the scenes.
    Intrestingly the previous post on the “wealth that commands us” alluded directly to this. This is the “game ” the BC liberals will continue to play. Unless some legal means is found to stop and reverse this “game”, we the people of this province are, “up the creek without a paddle”.
    There has to be a way to remove these con-artists from power.


  5. Dr. Fesharaki says there are three potential projects that could move forward in the next few years, and one of them is Petronas' western Canadian venture. So assuming he knows what he’s talking about, in a “few years” we could see one LNG project start. We know that from that deal we’ll derive a meager share of the resources extracted (locked in for twenty-five years), and even that won’t be realized until the proponent has recovered capital invested.

    An indicator of how far this deal is skewed in favor of the proponent is that it’s still considered potentially viable in the face of severely negative market conditions predicted for the foreseeable future.

    We might as well envision getting rich from convincing Donald Trump to build his wall along the Mexican border with BC lumber and then electrifying it with power from the Site C(hristy) dam.


  6. You have to wonder why government insiders think LNG will be a good deal for British Columbia. Instead, maybe they are counting on LNG being a good deal for each of them as individuals.


  7. Here are the new talking points for the 2017 election:

    “LNG is still good to go; it's taken longer to reach this point because we've been working with industry to ensure that BC is fully protected and our financial future is assured. Vote for us in 2017 so we can get on with the job.”

    In fact, it has been clear for a long time that industry will only proceed if all of the financial risks are taken by taxpayers, and almost none of the profits.


  8. The Conference Board is dependent on donations and contract fees from governments and others interested in their reports. It's a reality of consulting work that pleasing the paying client is job one.

    Public Accounts during Christy Clark's term as Premier show $420,000 paid to The Conference Board.

    According to the BIV article, the think-tank said, “This would be a game-changer for the province, providing a considerable boost to the economy.”

    However, 2016 is weeks away; Petronas needs to obtain environmental clearance from the new federal government and, most importantly, it faces opposition from Indigenous people that is unresolved and will likely entail years of court actions.

    There is zero chance the Petronas project will be a game changer in 2016.

    The Conference Board also says production of the non-combat vessels for the federal government is expected to ramp up at the Seaspan Shipyards in Vancouver. More fantasy since there is no certainty the program will proceed as politicians have previously claimed. A recent CBC report:

    “The government's massive $39-billion national shipbuilding procurement strategy (NSPS) is in need of repair, with costs for some projects soaring by as much as 181 per cent and others on the cusp of being cancelled, according to briefing materials prepared for some Liberal ministers.”

    In terms of the “strong” labour market, the most recent Statistics Canada report shows 45,000 full time jobs lost in the last two month while part time jobs grew 51,000. That is a very unhealthy trend so the government and their friends in media don't talk about it.


  9. ” Public Accounts during Christy Clark's term as Premier show $420,000 paid to The Conference Board. “

    Are you kidding me….. I never knew this and now I'm scratching my head wondering just hw many are not aware of this. The only part that is not surprising is how Christy loves to spend other peoples' money to make her look good.

    Norm, thanks so much for that information.

    Guy in Victoria


  10. The sad truth is that foreign money has driven housing prices up in the large urban areas of B.C. That resulted in huge increases in borrowing by people who've “gained” hundreds of thousands in property value. They take that money to car dealers and durable goods retailers and use home equity to finance expensive house renovations or vacation properties.

    So yes, many in BC are enjoying good times now.

    But, the good times are based on a dangerous real estate bubble, that may burst at any time. Our American cousins had the experience.

    If B.C. real estate prices crash, all those loans based on home equity will suddenly take on a different look.


  11. Has anyone told Christy?

    O.K. that is redundant. I saw the other posts after I wrote that, but the question is still good.

    Didn't know my tax $s went to that Conference Board. I want my money back. I'm sure that money could be used to ensure nurses received additional training so they could fill those 1000 vacancies.

    Guess it must be filling those speciality nursing jobs doesn't help Christy and/or her friends.

    Saw the Conference Board report on the news and had difficulty believing it. You watch other things on the news and there does seem to be a lot of poverty around. Unemployment is still around and not getting lower. some trades may be in demand because of the house building but saw a news item on a Vancouver Island T.V. station which talked to a couple who weren't finding employment and both had training, etc. Just couldn't find work.

    I sometimes get the feeling this province is in real trouble and what we see from the MSM and provincial government is less than truthful. There are parts of the lower mainland that appear to be doing well, but then you leave those areas and go to other parts of the province, not so much. I sense over all wages are not great, jobs are not growing on trees but some people have equity in their homes and are using it. The banks will end them money.

    I'm sure in the end Christy and her friends will “pay” the foreign corporations to “buy” the LNG so she can get re-elected. They still give a couple of hundred million to the film industry don't they?


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