Despite the doom and gloom that many see in the global LNG market –– too much supply, weak demand growth, and low LNG prices –– the possibility remains that the sector may offer the opportunity for low-cost, highly responsive market participants to do quite well, and even thrive. How can that be? After all, we’ve just seen another year of low crude oil prices resulting in very low oil/natural gas margins, and the expectation of high oil/gas margins were critical in supporting the development of many U.S. liquefaction/LNG export projects. But a combination of responsive demand, low cost infrastructure development and the possibility that number of exporting countries could run out of gas at or near the end of their existing contracts could change the outlook for ongoing LNG export development. Today, we look at the LNG market in the context of themes discussed at the North American Gas Forum (NAGF). Warning: this blog includes a plug for this year’s NAGF conference.
Each fall, the NAGF gives natural gas producers, pipeline companies, LNG exporters and importers, major gas consumers and government officials an opportunity to examine the state of the natural gas industry in North America and debate policy directions. As in 2015, this year’s NAGF is expected to give particular attention to the international LNG market, which has been seen as “the next big thing” driving gas demand growth. At last year’s forum, the president of one of the major U.S. developers of new liquefaction/LNG export capacity presented an interesting and thorough assessment of the global LNG market into which the U.S. export projects are beginning to compete. Today, we look back at that presentation, and consider the challenges –– and potential –– ahead for U.S. LNG exporters in 2017 and beyond.
The NAGF is a prestigious, high-level policy gathering held each fall in Washington, DC –– this year’s forum runs October 2-4. Last year, in his presentation, Octavio Simoes, president of Sempra LNG (which is a partner in the Cameron LNG project now under construction in southwestern Louisiana) examined the gas demand markets in Europe and Asia; the development of indigenous gas supply in those regions; the fight for market share between pipeline gas and LNG; and the relative competitiveness of U.S. LNG export projects. In his talk, Mr. Simoes acknowledged the market’s challenges, but also reminded attendees of what spurred development of the first round of U.S. liquefaction/LNG export projects in the first place –– and why those drivers remain relevant today.