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Goldman: global LNG projects at risk
Material posted: Publication date: 12-10-2014

LNG projects in Africa, Canada and Australia will be suspended or even cancelled, because, according to Goldman Sachs Corp, a growing global demand decreases and the level of production in the U.S. increases.

Global demand for LNG will grow by 5% by 2020 and 4% by 2025, say Goldman Sachs analysts including Mark Wiseman. Earlier, the Bank predicted growing by 6% and 5% respectively.

Even in the US, where in the next few years, analysts expect Goldman's final approval for the production of over 40 million metric tons of gas, we are expecting delays of projects. Thanks to advanced technologies such as hydraulic fracturing, the United States became the largest producer in the world.

Delivery from the USA compete with supplies from Qatar and Australia, which are the largest exporters, leading to changes in the global LNG market. The growth of gas production from shale formations including the Marcellus Deposit in Appalachia, resulted in a decrease to 69% of the maximum level of 2008

In addition, factors such as restarting nuclear reactors in Japan, the success of China in the field of exploration and production of shale gas could also reduce demand for LNG.

Canada, Australia

According to Goldman several projects in Canada and Australia will be rescheduled for a later date due to uncertain production costs and price-sensitive buyers. In Papua New Guinea lowest risks in the increased production of LNG, the analysts add.

"Outside the U.S., we believe Papua New Guinea and East Africa are the regions that can have a price competitive advantage, say analysts Goldman. - Having regard to the increased attention to financial discipline in recent times, we see that the number of costly LNG projects had been eliminated from the priority of most companies, such as Chevron, Royal Dutch Shell, BG Group, ExxonMobil."

The Bank expects significant growth in demand in Asia, particularly in China and ASEAN countries, with a slight increase in demand is expected in India, South Korea and Japan.

"More than 20% of future import prices for LNG in Japan is linked to gas prices Henry Hub," say Goldman analysts.

Henry Hub — a distribution hub in Louisiana, where the eight largest U.S. gas pipelines. The price at the Henry Hub serves as a reference for price setting at spot (one-off) gas contracts in the United States.

China's Policy

China's policy contributes to the growth of gas demand, particularly industrial and domestic consumption, according to the report. Nevertheless, gas power generation is not a priority in China because of the lack of supplies at competitive prices unlike other raw materials, according to the Goldman report.

LNG demand in Thailand, Singapore, the Philippines, Indonesia and Vietnam will grow and by 2025 will reach the aggregate level of 42 million tons per year.

"The ASEAN countries that have traditionally been LNG exporters, has now become a major center of demand due to economic growth, urbanization, and the decrease in the level of local gas supplies, says Wiseman. - LNG is often initially reduces the fuel cost by replacing oil consumption and more expensive pipeline gas".

Other studies

Other studies also confirm these forecasts.

According to analysts from the Institute of Energy Economics abundant LNG supply in Asia will be maintained until 2020 the LNG supply due to commissioning of new projects in the next few years in the United States will continue to grow and the growth rate of supply from Australia is likely to exceed the growth rate of demand.

"After 2020 can be running new LNG projects, for example in Canada, Russia and East Africa. Potentially will have a high level of supply in the market" - say the analysts of the Institute of Energy Economics.

Japan is the world's largest LNG importer, accounting for about 40% of global demand. Despite the suspension of work of nuclear reactors, the demand for LNG in Japan in the last two years pretty evenly. After a sharp rise in LNG demand following the accident at NPP "Fukushima" in 2011, consumers have learned to limit consumption of electricity. Meanwhile, competition for consumers is growing, as the worldwide implemented or are preparing to launch more than 50 new LNG projects.


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