WASHINGTON: Demand for shipments of liquefied natural gas from Asian economies that are the world’s biggest gas importers dropped in 2015, according to a report, including a first-ever decline in China.
Shipments of LNG came to 245 million metric tons last year, or about 33 billion cubic feet a day, even as global production of the super-chilled natural gas rose 1.6% to 250 million metric tons, or 32 billion cubic feet a day, energy consultant Wood Mackenzie said in an annual report on the industry.
The increase in supply comes amid a steep drop in spot market prices in Asia over the past year to below $7 per million British thermal units. Prices may remain depressed with the start of shipments this year from the U.S. Gulf Coast and a ramp-up in gas exports from Australia.
Australia and the U.S. will help boost global LNG production by an estimated 50% over the next five years, which is beyond the capacity of Asia to absorb, Giles Farrer, Wood Mackenzie’s Research Director for Global Gas & LNG supply, said in an interview. “We’re going to have an excess of LNG sloshing around that isn’t going to the traditional LNG markets” in Asia, Mr. Giles said.
Asia represents more than 70% of world-wide demand for LNG, but Wood Mackenzie said demand from the region’s largest buyers dropped in 2015, including a first-ever decline in shipments to China, which dropped more than 1%, after years of double-digit growth. South Korean imports of LNG fell 11% on the year and shipments to Japan, the world’s single largest market, declined 4%, the report said.
That was offset by growing demand from newer importers such as Egypt, Jordan and Pakistan, the report said.
Lower prices for LNG will likely spur increased demand from other markets, including those with under-utilized LNG import capacity, such as the Britain and continental Europe, Mr. Giles said. “New LNG [production] will compete with existing gas pipelines in the European market from suppliers like Norway and Russia,” he said.
Longer-term, lower LNG prices will prompt emerging markets outside of traditional buyers in Asia to build infrastructure needed to import LNG. It can take as little as six months to install a ship-based offshore regasification facility, Mr. Giles said.
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