Giving an overview of the market, Banchero Costa head of research Ralph Leszczynski said the LNG trading routes are still dominated very much by exports to Asia and especially East Asia.
And while Qatar remains the largest exporter for now, this is set to change dramatically once the large quantities of Australian gas come online.
Adding further complexity to the equation for LNG shipping is the fact that not all of these LNG export volumes will necessarily be transported by sea. While there is “no doubt about enormous prospects for gas demand and consumption in China”, it has options to go by land pipelines from Central Asia and Russia, Leszczynski pointed out.
As it about half of China’s imported gas comes through pipelines from Turkmenistan in particular, he said. In addition, China also opened a pipeline through Myanmar last year.
There has been no new nett capacity over the last three years, Leszczynski noted. “This will change significantly by the end of the decade,” he said. Unfortunately the market will have to wait till 2018 or 2019 before new supply comes onstream from Australia, US and Canada as well projects in Africa such as in Mozambique and Tanzania, although these will come into play later than 2020.
With some 40 LNG carriers expected to be delivered this year and a similar figure over the next two years, there is a mismatch of supply and demand and its effects are being seen in the spot rates now, which have crashed from the $150,000 a day levels just a couple of years ago to $30,000 to $40,00 a day currently, Leszczynski said.
“There is a counter-cyclicality to what is happening on the trade side which has been unparalleled in the past,” he said. With the continued deliveries over the next year or so and with the large projects in Australia only coming up in 2017, this year and the next are going to be “somewhat challenging”, Leszczynski concluded.
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