LNG market at a 'tipping point,' CERAWeek speaker says

If you are in LNG today, you want to be in Asia, the world’s biggest market for the power plant fuel.

As much as there is opportunity, however, there also is uncertainty.

The opportunity comes from the fact that the continent accounts for more than 70% of the world market for LNG. At the same time, concerns about oversupply due to significant new and expected output from the US and Australia have raised questions about how the renewal of long-term contracts will shake out as they expire by early next decade.

The level of economic growth in China, the world’s most populous country, also is an uncertainty. That is forcing developers of proposed export projects in the US to be more cautious about moving forward with building their liquefaction terminals.

If there is reason to be confident amid those dynamics, it is that virtually all of the new supply being produced now or planned for export facilities currently under construction is expected to be used up over the next five years, creating new demand around 2022. Also, new markets and buyers are emerging with different needs.

“I’m confident we are at the tipping point,” said Hiroki Sato, chief fuel transactions officer at Jera, a Japanese firm established by Tokyo Electric and Chubu Electric that is the biggest individual buyer in the global LNG market.

Speaking in Houston on Wednesday at the CERAWeek by IHS Markit energy conference, Sato said fragmentation of LNG buyers in Asia is helping to remove some uncertainties among producers, giving more weight to the opportunities that exist.

“We are seeing a lot of alliances both at the sellers’ side and the buyers’ side in LNG markets, especially in Asia,” Katsumi Kuroda, a senior adviser for Cheniere Energy’s marketing unit, said at the conference.

Houston-based Cheniere became the first US exporter of LNG produced from shale gas when it launched its initial cargo in February 2016. It has ramped up output since then, operating two trains and commissioning a third. Two more trains are planned, and a sixth has been proposed and is awaiting commercial support before a final investment decision is made.

Jera accepted its first shipment of LNG from the US Lower 48 states on January 26 from Cheniere’s Sabine Pass export terminal in Louisiana.

“Asia is one of the largest and most important markets for LNG,” Kuroda said. “It is an important engine for further growth of LNG.”