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New LNG Supply May Flood Gas Market by 2018, Bernstein Says

Liquefied natural gas markets may face a glut by 2018 as about 250 million metric tons a year of new supply comes online, according to Sanford C. Bernstein & Co.

Projects that are planned but have yet to reach the final investment-decision stage might add 68 million metric tons a year of supply by 2020, the company said in a research note today. Additional projects at a more speculative stage may add a further 183 million tons of capacity, Neil Beveridge, an energy analyst at Bernstein in Hong Kong, wrote in the report.

“Despite the short-term tightness, a new wave of long-term LNG investment is building, which will lead to a massive increase in global LNG capacity by 2016/2017 and could ultimately spark the next global glut of LNG,” Beveridge wrote.

Spare capacity is expected to reach historic lows in 2013, with few LNG projects scheduled to begin operations before then as demand increases, according to the report.

Global demand may rise to 408 million metric tons a year by 2020, when Australia will become the leading global supplier of the fuel, Bernstein said. Eight major LNG projects have been approved in Australia in the past two years, creating about 70 million tons a year of capacity, according to the report.

The company forecast that few additional LNG projects will be approved in Australia, as production shifts to North America and east Africa, where gas recovery costs are lower. New projects producing 40 million tons a year of LNG may be built in North America before 2020, it said.

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