Demand has weakened considerable over the past two years in the face of slower economic growth, mild weather, and competition from other fuels in the power sector. While weather and temperature anomalies may be temporary in nature, trends within the economy and power sector suggest a structural change, which will result in weak LNG demand through the early 2020s.
Gas demand for power is expected to decline through 2017. With non-power demand growth only modestly offsetting this decline, the ramp up of long-term LNG contracts from Australia is expected to result in South Korea being over contracted on an ACQ basis by an average of 110 mmcfd through 2024.
Long-term LNG outlook
Only by 2025 do we see the need for more supply, with the gap between demand and contracted ACQ levels widens to 1,300 mmcfd. While we expect LNG demand to pick up from the early 2020s as the result of retiring nuclear power plants, the widening gap is also because of expiring long-term contracts with Qatar and Oman. The ramp-up of new supply contracts from the Sabine Pass and Freeport LNG projects in the US are treated as fully flexible and we currently do not assume that all of these volumes will enter South Korea.