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INTERVIEW: LNG prices need to stabilize further for proper market rebalancing: ANGEA CEO


Global LNG price below $12/MMBtu makes LNG affordable for emerging nations

Buyers should lock in diverse energy sources, suppliers, contracts

Indo Pacific Strategic Energy Initiative Act positive for energy security

  • Author
  • Surabhi Sahu
  • Editor
  • Surbhi Prasad
  • Commodity
  • Coal Energy Transition LNG Natural Gas
  • Tags
  • United States

Even as LNG prices have fallen from the 2022 highs, current prices are still higher for many South Asian and Southeast Asian nations, necessitating the need for further stabilization for a proper market rebalancing, CEO of Asia Natural Gas and Energy Association, or ANGEA, Paul Everingham said.

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Asian spot LNG prices have plummeted over 80% since March 7, 2022, when prices hit a record high of $84.762/MMBtu after Russia invaded Ukraine. Platts, part of S&P Global Commodity Insights, assessed the JKM for August at $12.543/MMBtu June 22.

"In the absence of ready LNG availability from key supply nations worldwide -- the US, Australia, Qatar, -- an ANGEA commissioned study by Rystad Energy forecasts that global gas prices will likely remain at or above the $12/MMBtu mark on average for the foreseeable future," Everingham told S&P Global in an interview.

"This is likely to deprive emerging Asian nations of being able to afford gas to assist meeting their energy needs," Everingham said.

Rystad Energy has forecast LNG prices to be below $12/MMBtu to be affordable for emerging countries in the Asia region to transition from coal to gas, or to increase the use of more gas, Everingham said.

Europe appears to have quickly and successfully built productive gas infrastructure and created valuable storage, he said, adding that this should help them to manage better any future energy shortage.

Germany, for instance, had no LNG import capability at the start of 2022, but with rapid employment of floating regasification infrastructure saw a million mt delivered in Q1 2023, he said.

The country's import capacity is expected to double between 2024 and 2028 and by the end of the decade Germany is projected to have the world's fourth-largest LNG import capacity, he noted.

"Our work with Rystad Energy suggests that Europe has spent more than 750 billion Euro (or $1 trillion) over the last 12-18 months or so to lock in new energy supplies (as alternatives to Russia) and subsidize the cost of energy for consumers and industry," Everingham said.

However, a severe winter could still push Europe to faces shortages, prompting it to go the spot market, Everingham said. This would inflate the gas price and potentially harm Asian buyers once again, he said.

The situation in Europe highlights that it is always prudent for buyers to refrain from being completely reliant on one supplier of any energy source, Everingham shared.

"Likely gas buying nations should plan now for their gas contracting and should seek to lock in a range of gas suppliers and contracts. Supply contracts should also be of different lengths so that their expiry is staged," he noted.

Ramping up supplies

"Our research suggests that LNG consumption will continue to grow in Asia from 2025-2026," Everingham said.

"We do not believe that demand is the underlying problem. We would argue that sufficient supplies are required to support the availability of affordable energy," he said.

To increase gas supplies, it was imperative to streamline regulatory and permitting processes among supplier countries while also strengthening gas infrastructure in buyer nations, he said.

Further, export approvals and transparent regulations also provide greater certainty to investors, he added.

"It is also evident that Asian LNG buying countries are anxious about the increasing gas market intervention by the Australian government," Everingham said.

"Countries like Japan, South Korea, Taiwan would like to see more stability and certainty of Australian supplies and until that is provided Asian nations will remain concerned. This will not only harm trade, but it will also see investment flows out of Australia," he added.

Successive State & provincial Governments in Australia have banned certain exploration for gas, which has significantly impacted domestic supply, he said.

Sustainable Energy

Everingham stressed on the need of mechanisms for development finance in Emerging Asia and hailed the recently introduced Indo Pacific Strategic Energy Initiative Act into the US Congress as a positive development.

"The Act acknowledges both the crucial role for US LNG in worldwide energy transition and the importance of reducing emissions and ensuring energy security for the Indo-Pacific region," he said.

"Meeting Asia's growing energy needs in the next three decades will require new gas projects and infrastructure to come online and the Indo-Pacific Strategic Energy Initiative Act is designed to help make that happen," he added.

While ready supply, infrastructure, and development finance will ensure affordability and reliability of energy resources, CCUS technology in Asia and alternative fuels such as ammonia will bring sustainability, Everingham said, adding that methane measurement and capture will also trim emissions.

"We've seen the Indonesian government releasing draft CCUS regulations and, more recently, the Government of Japan identifying seven sites at which it would seek to commercialize CCUS," Everingham said.

Geologically, large parts of Asia are suitable for CO2 storage while Australia is already home to the world's largest operational CCS system, he said.

CCUS will also benefit by promoting commercial opportunities as it would lead to the development of new industries and businesses in Asia, he added.