Global gas trends through first-half 2012 show the LNG market for the next 5 years will increasingly tighten and residual volumes left for Europe will shrink. Thereafter, the market will loosen, according to a recent commodities research note from Trevor Sikorski and Miswin Mahesh of Barclays Research, part of Barclays Bank PLC.
The analysts estimate the LNG available specifically for Europe will fall to about 15 million tonnes/year (tpy) by 2014, from 2012 levels of 46 million tpy, before beginning to return to current levels when large Australian trains ramp up production and US exports of LNG begin. Europe, said the analysts, will continue to rely on pipelines to meet natural gas needs.
One of the most notable trends in the global gas market this year, they said, has been the redirecting of LNG away from Europe towards Asia: European takes are down by 33% year-over-year in first-half 2012; 50% in the UK alone. Asian takes, on the other hand, are up by 16% year-over-year.
Asian demand, stoked by additional demand from Japan and new regasification in China, India, and others, has pulled gas away from Europe, which is seeing lower demand and greater competition to LNG from pipeline supply.
While these trends will persist for the rest of the year, the global gas trade’s future is “colored by a large number of moving pieces.”
On the supply side are large LNG liquefaction projects: coal seam gas projects in Australia, the potential for North American shale production to be exported, and projects in new basins just being explored—East Africa, East Mediterranean.
On the demand side is the current trend for Asian markets to take more and more LNG, reinforced by several large regasification projects under development as Japan seeks to replace much of its nuclear power and such countries as China and India look to natural gas to help diversify their energy mix and moderate their dependence on coal.
In Europe, said the analysts, the “potential golden age” of gas has somewhat stalled as relative pricing no longer favors natural gas in power generation and the number of newbuild, gas-fired power projects begin to stall as the “uptake of renewable power generation tips the region’s power markets into capacity over-supply.”