Liquefied natural Gas (LNG) prices are likely to stay high over the next few years on the back of demand from strong Asian economic growth and the switch to cleaner energy, particularly in China, Qatar National Bank says in its latest report.
QNB said the trend was also likely to continue, notwithstanding the so-called US shale gas revolution and the coming into operations of the USD400bn Russia-China gas pipeline signed on May 21, 2014, Qatar News Agency reported.
The bank said the trend of high prices would continue to support Qatar’s large current account surpluses.
Global LNG deliveries were an estimated 240 million tonness broadly flat compared with 2012.
Qatar continued to be the largest LNG exporter, with about one third of global supply.
At the same time, demand from Asia and Latin America increased, with China, South Korea and Mexico registering the largest increase in LNG demand, the QNB report said.
The report said China brought three new re-gasification terminals online as its switch from coal to LNG as a cleaner fuel for electricity production continued.
This tightening of the market resulted in an average USD1 increase in LNG prices per million British thermal units (mBtu), despite Brent crude oil prices falling USD4.5 per barrel and lower LNG demand from Europe.
QNB said the outlook for the LNG market was likely to continue along similar trends in 2014.
On the supply side, three new LNG trains in Algeria, Australia and Papua New Guinea are expected to come on-stream in 2014, which is likely to add about 10 million tonness to global LNG production - a 4.2 percent increase.
For demand, continued growth in Asian demand and the need for Europe to diversify away from Russian pipeline gas may outpace the increased supply, leading to a small increase in LNG prices of about USD0.5 per mBtu despite the expected decline in Brent crude oil prices.
“The ongoing violence in Iraq and Syria could, however, result in higher-than-expected LNG and crude oil prices in the second half of 2014,” the report said.
“Overall, robust LNG demand is likely to outpace global supply up to 2020. This is likely to imply higher LNG prices as demand from Asia remains robust. As the largest exporter in the world, Qatar is likely to benefit from higher LNG prices, resulting in large current account surpluses for years to come.”