Second LNG Glut Forecast for 2025

The LNG market is heading toward a second supply glut post-2025, owing to the number of new projects that have received financial sanction in 2019, according to Mike Fulwood, senior research fellow at the Oxford Institute for Energy Studies and chairman of the International Gas Union's Gas Pricing Group. Fulwood was speaking at the LNGgc conference in London October 9.

Fullwood said a minimum of 40mn mt/yr of new liquefaction capacity was needed to meet demand in 2025, but that five projects totalling 63mn mt/yr had already been approved by companies this year.

In addition, he said that current spending on US major ExxonMobil's LNG project in Mozambique suggested strongly that it would receive a positive financial investment decision, making it the east African country's third LNG project to progress to construction. This would bring new capacity expected on-stream in 2025 to nearly 80mn mt/yr.

Additional project approvals in Canada and the US, as well as the expected expansion of Qatari LNG capacity, would add to the oversupply.

As a result, Fulwood forecast that spot prices in Japan would peak at no more than $8/mn Btu in the period 2022-2024, as the market tightens, before falling from 2025 to around $6/mn Btu out to the end of the second half of 2027. Spot prices in Europe would be lower, he said.