China and Europe are reshaping growth prospects for the global market for liquefied natural gas because analysts see a higher-than-expected consumption and a shorter arrival of a supply shortfall. Worldwide annual LNG demand will increase to 579 million tonnes by 2030, according to Sanford C. Bernstein & Co. analysts, up 9.2 percent from the previous forecast.
Faster consumption growth will absorb the global excess of supply between 2021 and 2023, two years earlier than was predicted just six months ago, according to Citigroup.
"LNG demand has grown again," Bernstein analysts, including Neil Beveridge, said in a statement on Monday. "LNG is a highly cyclical industry. It always was and always will be. After a period of oversupply, we are reaching the next market tightening cycle. "
Global demand increased 12 percent last year to 290 million tonnes, boosted by a 46 percent rise in China and an 18 percent increase in Europe, according to Bernstein. There are opportunities for more growth in Europe because it is projected that domestic supply will decline, imports by pipeline are close to full capacity and there are doubts about future expansions due to geopolitical tensions.
China's growth is being fueled by government policies to promote gas-burning, which is less polluting than coal, although cooler winter and unplanned pipeline disruptions have contributed to the increase seen last year, analysts at Citigroup , including Dale Koenders, in a note published on April 13.
Demand in the country could grow to 80 million tonnes per year by 2030 compared with less than 40 million last year, but the lack of pipeline and storage infrastructure could limit demand to between 50 million and 60 million tonnes.
Japan, the world's largest buyer of LNG, will need more supercooled fuel to generate power in the future than previously expected because the country will struggle to meet its nuclear energy targets, Koenders said. Limiting the life of the nuclear reactor to a maximum of 40 years will make the reactivation economically unviable for all mills by 2020, with the exception of 10-12, he said.
The next investment cycle in new LNG production is expected to begin in 2018 or 2019, and 200 million tonnes per year will need to be approved between now and 2025 to keep markets supplied by 2030, Beveridge said.
USA, Qatar and Papua New Guinea are better positioned to develop projects to meet this need. "Buyers think they are at an advantage in a gas market that seems to be in a long position but we think they continue to overestimate the growth of the new supply and underestimate the demand," Beveridge said. "This will trigger a further reorganization of LNG supply from 2018-2019." Source: UOL Economy
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