LNG in the Global Context

The global liquefied natural gas (LNG) marketplace has been amply supplied for some time, partly a consequence of the impact on demand of oil-indexed LNG during a period of rapidly appreciating oil prices. Global supply also has been influenced by the growth in U.S. natural gas production and the surge of interest in monetizing U.S. gas resources via the global LNG value chain. The Covid-19 pandemic is having a major impact on the global LNG market, reducing demand and delaying final investment decisions (FIDs) on new liquefaction capacity. Expectations that the growing demand would create a need for new capacity to come on stream by the mid-2020s to balance the market are having to be revisited. Developers of nearly 500 Mtpa of proposed new liquefaction capacity, half of it in the U.S., which was being lined up to fill the potential gap between supply and demand, are having to revisit their plans because buyers are reluctant to enter into new long-term commitments required to underpin the investment. How will the U.S. LNG exports fare given these indications? U.S. developers and suppliers must compete in an industry mix within which upstream and LNG project costs face considerable pressure. With more options than ever for customers, U.S. and North American developers will need creative commercial tool kits.