Herd behaviour may prompt fears of LNG over-supply

Subject

LNG investment outlook.

Significance

Spot prices of liquefied natural gas (LNG) have fallen this year, as new supply has collided with a relatively warm Northern Hemisphere winter. Oil and gas companies see a supply shortfall emerging in the mid-2020s and are investing in LNG plants. The deep decarbonisation required to meet 2030 climate change targets means gas is likely to gain market share against coal in power generation and oil in transport.

Impacts

• Low LNG prices will encourage coal-for-gas switching and embolden new importers to enter the market.
• Higher flows of LNG into Europe as a result of falling domestic gas production will solidify the price cap on pipeline import prices.
• LNG will continue to make inroads in the shipping and land transport sectors.