Hosted by Spain’s leading energy stakeholders including Enagás, Repsol, Gas Natural Fenosa and Técnicas Reunidas, Gastech 2018 returns to Europe after three previous editions in Asia, and reflects the resurgence of gas & LNG in Europe.
The global gas market in 2021 is expected to have 55% more LNG than in 2015, with 140mmtpa more new capacity mostly from Australia and the US. The new wave of Australian LNG supply started with QC LNG in 2015, with first volumes from the US and Sabine Pass following in 2016.
There remains an expectation that all of this new LNG supply will cause an oversupply, pushing prices down. Low prices in the summer of 2016 suggested as much, but subsequent northern hemisphere winter prices through 2016/17 have remained at or above oil parity levels. The reality is the market has held up well so far.
New demand in emerging markets has been key to this. Between them the markets of Egypt, Jordan and Pakistan imported some 12Mt in 2016, compensating for a demand decline in more established markets. Also the uptick of demand in China and India is providing additional reasons for positivity amongst suppliers. China’s LNG imports boomed in 2016 and will be sustained by favourable environmental policy and competitively priced LNG.
More new LNG markets will emerge. These will be encouraged by greater supply availability and a willingness to develop quick-to-deploy infrastructure solutions, including Floating Storage and Regasification units (FSRUs).
Nevertheless the threats and opportunities associated with oversupply hangs over the industry. It appears likely that oversupply conditions through the medium term will be at their worst during northern hemisphere summers, when China LNG demand is at its lowest. And it also appears likely that Europe will be key to global price formation for the next 5 years.
Europe – the heart of the global gas market
Europe will need to absorb a large proportion of new LNG supply. Europe offers liquidity and has regasification capacity available, while other markets will take time to develop. Rising European imports will come from legacy suppliers in the Atlantic and Middle East, displaced from the Pacific by new more proximate supply. It will also come from new supply in the Atlantic, most notably the US.