Asian liquefied natural gas (LNG) buyers are facing a finely balanced market in the near term, where supply disruptions or demand increases could lead to significant price fluctuations, according to Mangesh Dilip Patankar, vice president, APAC Gas and LNG Consulting at Wood Mackenzie.
Speaking at the Gastech 2023 conference in Singapore, Patanker highlighted that the LNG market is currently at a critical juncture, causing uncertainty in pricing and contract terms. This uncertainty has widened the gap between the expectations of buyers and sellers.
Patanker noted that many LNG buyers are challenged with ensuring LNG supply security while maintaining competitive procurement costs and flexible contractual terms. Simultaneously, LNG sale and purchase agreements (SPAs) are evolving as LNG trading grows.
Wood Mackenzie Lens data indicates that Australia and Qatar will be the largest suppliers of LNG to Asia from 2023 to 2030, accounting for nearly 60% of the total LNG volumes delivered to Asia during this period.
Patanker believes that the LNG market, which has cooled off from its previous highs, is now attracting interest from emerging buyers in Asia. However, he advises potential buyers to understand LNG’s complex fundamentals and monitor its price volatility.
He also pointed out that with the new wave of LNG projects not expected to significantly increase supply until 2026, the market is likely to remain tight. Wood Mackenzie LENS data shows that LNG supply is expected to grow by an average of 40 million metric tonnes per annum (mmtpa) annually from 2026 to 2028, leading to market rebalancing and potential price decreases.
Patanker believes that this rebalancing will enhance gas affordability, increase LNG availability in Europe, and stimulate demand growth in Asia. However, the outlook beyond 2028 depends on factors such as liquefaction project final investment decisions (FIDs) and the pace of the energy transition, along with other supply-demand dynamics.
Price and supply concerns will persist until the market rebalances in the second half of the decade.
