CALGARY, A.B. – According to commodities analyst Martin King, global markets for Liquified Natural Gas could return to balance as early as 2021, ushering in a “second wave” of opportunity for developers of the supercooled gas on Canada’s West Coast.
In a Financial Post article, King says that the demand for the commodity fell in recent years as the rapid build out of new LNG export facilities in the United States and Australia led to a glut of international supply, dampening the outlook for would-be LNG exporters in Canada.
Meanwhile, the Pacific NorthWest LNG export terminal near Prince Rupert received regulatory approval from Ottawa last week. However, there’s been speculation over whether the project will be built as a flood of new supply is set to enter international markets over the next few years.
“There’s still a window open,” said King, the director of institutional research at GMP FirstEnergy.
“A decision would have to be made, say in the next 12 to 24 months, if you’re going to go ahead with a project and potentially capture the opening of that second wave of supply opportunity,”
That opportunity largely hinges on demand. Global need for LNG could reach roughly 400 million tonnes per annum early next decade under a high-demand scenario.
LNG spot prices in Asian markets such as Japan and South Korea have remained buoyant ever since the global economic recession, kicking off a race to build up LNG supplies. Spot prices in Japan topped US$17 per million British Thermal Units (MMbtu) in recent years, but have since fallen to the US$6 per MMbtu range.
Meanwhile, the global oil market has returned to a supply-demand balance, even as lingering concerns over a persistent supply glut continue to weigh down benchmark prices for crude. The oil market could cross over into a state of under-supply by mid-2017 as production levels around the world gradually come offline.