LNG demand that is not covered by supply contracts among the world's seven biggest buyers could grow fourfold to about 80 million tonnes per annum by 2030, coming close to the amount of the buyers' contracted demand as their total demand increases, according to a report from consulting firm Wood Mackenzie.
As these large Asian LNG buyers seek variety in their contracts, they will consider factors in addition to price, such as contract flexibility and indexation, supply diversity, upstream participation and seasonality, Wood Mackenzie said.
"Market liberalization and uncertainty on longer-term demand in more mature markets, such as Japan, South Korea and Taiwan, will mean more room for spot and short-term purchases," research director Nicholas Browne said. "While oil indexation will continue to dominate markets due to familiarity and ability to hedge, Asian buyers should be more inclined towards hub indexation to boost diversity and enable sales into Europe."
The projection of demand reflected the fact that Asia is a key market for the LNG industry, even as a U.S.-China trade war creates uncertainty for U.S.-based exporters. The forecast also highlighted the need for commercial sanctioning of LNG export projects around the world at a time when energy market experts warn of a supply crunch by the mid-2020s.
The LNG buyers Wood Mackenzie cited — CNOOC China Ltd., CPC Corp. Taiwan, JERA Co. Inc., Korea Gas Corp., PetroChina Co. Ltd., China Petrochemical Corp. and Tokyo Gas Co. Ltd. — together account for more than half of the global LNG market. Those buyers announced a total of 16 mtpa of LNG contracts in 2018.
"As China pushes on towards a lower-emission economy, its demand for gas and LNG has grown significantly, and we expect the trend to continue in the longer term," Browne said in a statement. "Other traditional major buyers, on the other hand, are facing legacy contract expiries and will be on the hunt for a mix of contracts to lower average costs and security in supply sources."
Wood Mackenzie predicted that 2019 will be a record year for LNG projects moving into construction as proposed ventures around the world with more than 220 mtpa total capacity target final investment decisions. "Some of the less prepared or competitive projects will slip into 2020 and beyond, but nonetheless a bumper year beckons," Wood Mackenzie said.