An Overview Of The Global LNG Market And Future Outlook

Seeking Alpha ^ | 25 Apr 2014 | Elliott Gue

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Summary

Supply-demand balance in the global LNG market remained tight in 2014, thanks to China's rapidly growing demand for this commodity and limited capacity additions on the supply side. Tightness should continue through the end of 2016, with the next slug of export projects in Australia bringing a degree of price relief and potentially redirecting some cargos back to Asia. The global LNG market should loosen toward the end of the decade as additional supplies come onstream and some contract rotation occurs. Against this backdrop, the Asian market's premium to North American natural gas (after liquefaction and transportation costs) could shrink to $2.00 per mmBtu from $4.00 per mmBtu. Steer clear of pure plays on LNG exports because of expenses and extended timelines to build infrastructure. Prefer names that offer exposure to trend, but also near-term upside drivers.

When natural gas is cooled to minus 260 degrees Fahrenheit at a liquefaction facility, the fuel condenses to roughly 1/600th of its original volume, facilitating overseas transport in specially designed ships.A

Regasification terminals heat the liquefied natural gas (LNG) to restore the delivered volumes to a gaseous state before pipelines transmit the product to end-users.

This network of LNG carriers and import and export terminals effectively releases natural gas from the geographical constraints of the pipeline network, enabling producers to deliver their output to overseas end-markets.

LNG accounted for about 32 percent of the global trade in natural gas in 2012, compared to 26 percent in 2005. At the same time, LNG represents only 9.8 percent of global gas consumption, making it a niche market...

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