Gas industry sees strong demand and LNG shortfall post-COVID by mid-decade

Many in the industry said in the long run the fuel will be needed to back up wind and solar power, replace coal-fired power, and produce hydrogen globally. (Shutterstock)
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Updated 25 June 2020

Gas industry sees strong demand and LNG shortfall post-COVID by mid-decade

  • Long term gas demand seen intact in energy transition

MELBOURNE: The gas industry sees no change to the strong long-run outlook for demand following the COVID-19 crisis, but expects a supply shortfall in the next four years as the lockdowns and oil price collapse lead to delays on gas projects.

Gas producers, buyers, liquefied natural gas (LNG) developers and a major contractor said in the long run the fuel will be needed to back up wind and solar power, replace coal-fired power, and produce hydrogen globally.

“We see the need for substantial investment in new projects and new liquefaction,” Exxon Mobil Corp’s Australia chairman Nathan Fay said at Credit Suisse’s annual Australian Energy Conference.

However, lingering uncertainty following a crash in LNG prices to record lows this year below $2 per million British thermal units (mmBtu) means only the lowest cost LNG projects will go ahead, major producers said.

More than 140 million tons of projects worldwide have been deferred. In Australia and Papua New Guinea alone, five are on hold — Exxon’s expansion of PNG LNG twinned with Total SA’s Papua LNG, Woodside Petroleum’s Scarborough and Browse, and Santos Ltd’s Barossa.

“It’s everything to play for — so a very bullish outlook on gas,” said Martin Houston, vice chairman of US LNG developer Tellurian, which recently deferred a final investment decision on its US Driftwood LNG project to 2021.

Japan’s Chiyoda, a major contractor to LNG projects, said work has largely dried up and there would need to be stability in the market before developers move ahead with projects.

“To be perfectly honest, we don’t see any green shoots right now,” said Chiyoda Oceania’s president Andrew Tan.

Royal Dutch Shell sees short term concerns weighing on everyone’s decisions about new projects. Shell Australia chair Tony Nunan said: “I’m sure all companies, all operators or producers across the globe are going to be focused on that affordability question just because of the uncertainty they see in the macro markets.” 

Research firm Rystad Energy said with gas prices around the world still trading near $2 per mmBtu, LNG developers with all but the lowest costs will hold off on new projects.

“But that will again cause a shortfall for the LNG market four or five years down the road,” Rystad’s head of analysis, Per Magnus Nysveen, told the conference.


Saudi Arabia’s 6-point plan to jumpstart global economy

Updated 44 min 16 sec ago

Saudi Arabia’s 6-point plan to jumpstart global economy

  • Policy recommendations to G20 aim to counter effects of pandemic

DUBAI: Saudi Arabia, in its capacity as president of the G20 group of nations, has unveiled a six-point business plan to jump start the global economy out of the recession brought on by the COVID-19 pandemic.

Yousef Al-Benyan, the chairman of the B20 business group within the G20, told a webinar from Riyadh that the response to the pandemic -— including the injection of $5 trillion into the global economy — had been “reassuring.”

But he warned that the leading economies of the world had to continue to work together to mitigate the effects of global lockdowns and to address the possibility of a “second wave” of the disease.

“Cooperation and collaboration between governments, global governance institutions and businesses is vital for an effective and timely resolution of this multi-dimensional contagion transcending borders,” Al-Benyan said.

“The B20 is strongly of the view there is no alternative to global cooperation, collaboration and consensus to tide over a multi-dimensional and systemic crisis,” he added.

The six-point plan, contained in a special report to the G20 leadership with input from 750 global business leaders, sets out a series of policy recommendations to counter the effects of the disease which threaten to spark the deepest economic recession in nearly a century.

The document advocates policies to build health resilience, safeguard human capital, and prevent financial instability.

It also promotes measures to free up global supply chains, revive productive economic sectors, and digitize the world economy “responsibly and inclusively.”

In a media question-and-answer session to launch the report, Al-Benyan said that among the top priorities for business leaders were the search for a vaccine against the virus that has killed more than half-a-million people around the world, and the need to reopen global trade routes slammed shut by economic lockdowns.

He said that the G20 response had been speedy and proactive, especially in comparison with the global financial crisis of 2009, but he said that more needed to be done, especially to face the possibility that the disease might surge again. “Now is not the time to celebrate,” he warned.

“Multilateral institutions and mechanisms must be positively leveraged by governments to serve their societies and must be enhanced wherever necessary during and after the pandemic,” he said, highlighting the role of the World Health Organization, the UN and the International Monetary Fund, which have come under attack from some world leaders during the pandemic.

Al-Benyan said that policy responses to the pandemic had been “designed according to each country’s requirements.”

Separately, the governor of the Saudi Arabian Monetary Authority said that it was “too early” to say if the Kingdom’s economy would experience a sharp “V-shape” recovery from pandemic recession.