Lessons Learned When the World's Top LNG Companies Met in Perthby
Chevron, Shell and Woodside agree LNG markets are waiting game
Low prices are opportunity to expand markets: RasGas CEO says
A lot has changed in the 18 years since the “world’s largest global LNG event” was last held in Perth. The liquefied natural gas industry is no longer dominated by a handful of producers. Global export capacity has surged more than threefold to 300 million metric tons a year. More recently, a wave of new supply has overwhelmed demand and it’s now time for producers to wait for customers to catch up. As Day 2 of the LNG18 Conference starts, here’s a taste of what the energy giants had to say on the opening day.
Time to be patient
Chevron Corp., Royal Dutch Shell Plc and Woodside Petroleum Ltd. all agreed it was a waiting game as the over-supplied LNG markets entered a hiatus. Companies have to focus on long-term natural gas demand, which is expected to grow by 35 percent over the next 20 years, Chevron CEO John Watson said. The U.S. company last month started the $54 billion Gorgon LNG project in Western Australia, the largest resource development in the country’s history.
Low prices expand markets
Depressed prices for LNG are an opportunity to expand markets, according to Hamad Mubarak Al Muhannadi, the chief executive officer of RasGas Co. Ltd. Regional price differences for the fuel are virtually gone and the market may remain “tough” for another five to six years before a rebound, he said. RasGas manages and operates seven LNG trains in Qatar, the world’s biggest exporter of the fuel.
Move with the times
LNG suppliers must add flexibility to long-term deals, Japan’s Inpex Corp. CEO Toshiaki Kitamura told the delegates. There may be a strengthening of alliances between buyers, he added. Inpex, Japan’s biggest oil and gas explorer, expects to start its Ichthys project in northern Australia in the third quarter of 2017, it said in September. Japan’s Jera Co. said in February that it’s in talks with Chinese and South Korean companies create an alliance of buyers, while China National Petroleum Corp. last month said it’s looking for opportunities to rework the pricing method on its LNG supply contract with Qatar.
Bigger isn’t always better
Energy projects don’t need to be bigger, Woodside Petroleum CEO Peter Coleman said. Rather, future projects may be smaller with staged expansions, he said. Producers need to adjust to the changing market and it may be time for these companies to move further into distribution. Coleman doesn’t feel any pressure to develop new assets as the market is in hiatus, he said. Woodside and partners including Shell and BP Plc last month scrapped plans to develop the $40 billion Browse LNG project in Australia after the plunge in oil and gas prices.
Look to the future
Asia Pacific demand may gain 36 percent by 2025, according to Western Australia’s Premier Colin Barnett. The country’s LNG production capacity could increase fourfold by the end of this decade to 85 million tons a year, likely making Australia the world’s leading producer, he said. Western Australia’s annual production capacity of LNG is forecast to more than double from 20.6 million tons in 2014 to almost 50 million tonnes by 2018.