LNG Glut Seen by FGE Pushing Prices to $3 as Soon as Next Year

  • Prices of the fuel last fell below $3 in 1999: Japan data
  • “Some people are going to have to lose billions”: Fesharaki

Liquefied natural gas spot prices will fall to $3 per million British thermal units by mid-2017 or 2018 as new projects worsen a global glut, according to energy consultant FGE.

A bevy of new export projects scheduled to start over the next few years will create more LNG than users around the world can burn, FGE Chairman Fereidun Fesharaki said in an interview Tuesday in Singapore. Most of the direct buyers of the supply are middlemen, not end users, and they will have to offer lower and lower prices to find customers.

LNG on the spot market near Singapore has fallen 68 percent since October 2014 to $4.43 per million Btu this week, according to Singapore Exchange Ltd. Prices will have to keep declining until they drop low enough to force some producers, probably in the U.S. or Australia, to reduce output, Fesharaki said.

“Some people are going to have to lose billions,” Fesharaki said.

LNG hasn’t been as cheap as $3 since July 1999, according to import data from LNG Japan Corp., which tracks both term and spot prices for imports by world’s largest buyer of the fuel. Global LNG production capacity is expected to rise to 420 million tons a year by 2020, up from 333 million this year, Goldman Sachs Group Inc. said in February. Demand by 2020 is only expected to be about 323 million tons a year, the bank forecast.

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