LNG Market Faces Period of “Unprecedented” Tightness – IEA

View of Singapore LNG’s tanks under construction, Image courtesy of Singapore LNG Corporation

(Bloomberg) — Global liquefied natural gas markets will face “unprecedented” tightness this year and next as incremental LNG demand from Asia exceeds new supply, according to the International Energy Agency.

Supply of the chilled fuel will increase by 2018 as new projects start in Australia, boosting global LNG trade by 31 percent from 2012 levels, the Paris-based IEA said in its Medium-Term Gas Report released today.

About 138 billion cubic meters a year of LNG production was under construction as of mid-2013, bringing total capacity to at least 500 billion cubic meters by 2018, according to the IEA. Of the new supply, almost 86 billion cubic meters will be sold to Asia and more than 80 percent has been contracted on a long-term basis, according to the report.

“There are many uncertainties about medium-term trends on the global LNG market,” including the direction of Japanese nuclear policy, Chinese purchases, delays at Australia’s liquefaction projects and the number of U.S. LNG export plants that will be approved, the IEA said. “Given these uncertainties, LNG buyers are changing their procurement strategy towards the introduction of new price mechanisms and away from the traditional oil price linkage, in addition to espousing stable supplies and reducing procurement costs.”

– Chou Hui Hong, Copyright 2013 Bloomberg.

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