The latest research by McKinsey Energy Insights (MEI) predicts the LNG oversupply could last until 2024, meaning few projects could reach financial investment decision in the next 12 to 18 months.
The research shows the LNG supply glut is“exacerbated by the 100 million tons per annum of new export terminal capacity currently under construction in the United States and Australia.”
By 2019, MEI expects the oversupply to peak at 60 mtpa.
According to James Walker said, “Our research shows that the current market oversupply is creating challenging conditions for operators hoping to take FID on projects in the near term.”
He adds that, in order to be viable, such projects would require an assumption of either a sustained high LNG price post-2024 or a cost optimization strategy to reduce projected capital expenditures.
In an oversupplied market, many projects will struggle to secure buyers, Walker said, adding that, even if the projects move to the construction phase, LNG supply would hit the market at a bad time.
The research predicts that the market will remain oversupplied unless the current low prices can stimulate a demand recovery, however, that response has been limited over the past two years.