Asian LNG buyers to face volatility until 2026

The world's leading energy research and consultancy firm, Wood Mackenzie, has predicted that Asian liquefied natural gas (LNG) buyers will face a volatile market until 2026.

In a press release issued on Tuesday, the firm forecasts that price and supply concerns will persist until the market rebalances in the second half of the decade.

Mangesh Dilip Patankar, vice president of APAC Gas and LNG Consulting at Wood Mackenzie, said that the new wave of LNG projects is not expected to significantly increase supply until 2026, leaving the market tight.

According to Wood Mackenzie's Lens data, LNG year-on-year supply growth is expected to average 40 million tonnes per annum (MTPA) annually from 2026 to 2028, which is predicted to bring prices down and improve gas affordability.

This is also expected to facilitate LNG availability for Europe and stimulate demand rebound in Asia.

"The outlook for the LNG market beyond 2028 depends on the level of liquefaction project final investment decisions (FIDs) within the next 1-2 years, as well as the pace of energy transition, in addition to several dynamic supply-demand related factors," said Patankar.

Mr Patankar, speaking on the sidelines of the Gastech 2023 conference in Singapore, pointed out that Asian LNG buyers are currently navigating a finely balanced market. Any supply disruptions or increases in demand could lead to significant price volatility.

He said the LNG market is at a critical juncture and the uncertain outlook has had a significant impact on pricing and contract terms, widening the gap between buyer and seller expectations.

"Many LNG buyers face the challenge of ensuring LNG supply security while keeping their procurement costs competitive and contractual terms flexible. Simultaneously, the terms in LNG SPAs [sale and purchase agreements] are also evolving as LNG trading increases," he added.

According to Wood Mackenzie Lens, Australia and Qatar will be the biggest suppliers of LNG to Asia from 2023 to 2030, with volumes exceeding 886 million tonnes (MT) and 827 MT, respectively. These two countries are expected to account for almost 60 per cent of the total LNG volumes delivered to Asia during this period.

Patankar believes that the LNG market, which has cooled off from last year's highs, now has emerging buyers, particularly in Asia, keen to reengage with sellers.

However, he warns that any Asian buyers seeking to re-enter the market must understand LNG's complex fundamentals and track its price volatility.

"As [LNG] buyers contemplate their options, it becomes crucial for them to evaluate the mix of pricing indices in their portfolio, such as oil or Henry Hub and whether they should also consider exposure to spot pricing or spot purchases," Mr Patankar said.

Meanwhile, Bangladesh's LNG imports are projected to triple after 2026, increasing from the current 35 million tonnes per year (MTPA) to around 10.50 MTPA.

The government currently imports around 3.5 MTPAs of LNG from its two existing long-term suppliers - Qatargas and OQ Trading (formerly known as Oman Trading International).

Over the past several months, the state-run Petrobangla has signed sales and purchase agreements (SPAs) with QatarEnergy and OQ Trading of Oman to import up to 3.0 MTPAs of LNG from 2026 onwards, according to sources.

The cabinet committee on economic affairs has also approved the signing of SPAs for long-term LNG imports from Malaysia's Perintis Akal Sdn Bhd, local Summit Oil and Shipping Company Ltd (SOSCL) and the US's Excelerate Energy Bangladesh Ltd. An aggregate amount of around 4.0 MTPAs will come from these sources.

Apart from the long-term suppliers, Petrobangla is expected to continue importing LNG from the spot market, further increasing the country's overall LNG imports from the international market.

azizjst@yahoo.com