Oil Crash Is a Double-Edged Sword for LNG With Projects at Risk - Bloomberg:
Oil’s rout may have been an unexpected boon for the biggest buyers of liquefied natural gas, but its knock-on effects may come back to bite.
That’s because more than a dozen proposed LNG export projects from the U.S. to Mozambique are at risk of being delayed or scrapped as crude careened to levels that make most of them unprofitable. If fewer of them come to fruition, that would ease a widening supply glut later this decade and potentially lift prices amid breakneck demand growth in Asia.
Almost 20 proposed export plants are vying for a shrinking pool of capital after a record number of terminals reached final investment decisions last year. Even before crude’s drop, developers were under pressure from a slump in global gas prices, milder winter temperatures and demand restraints from the coronavirus.
“With significant downward pressure on spot LNG prices and oil prices, it could be the double-whammy that really starts to make some projects seem uneconomic,” Jeff Moore, an analyst with S&P Global Platts, said in an email. “If oil prices stay low for much of this year, I would imagine it could have a material impact on supply projects looking to reach FID this year.”
Oil’s rout may have been an unexpected boon for the biggest buyers of liquefied natural gas, but its knock-on effects may come back to bite.
That’s because more than a dozen proposed LNG export projects from the U.S. to Mozambique are at risk of being delayed or scrapped as crude careened to levels that make most of them unprofitable. If fewer of them come to fruition, that would ease a widening supply glut later this decade and potentially lift prices amid breakneck demand growth in Asia.
Almost 20 proposed export plants are vying for a shrinking pool of capital after a record number of terminals reached final investment decisions last year. Even before crude’s drop, developers were under pressure from a slump in global gas prices, milder winter temperatures and demand restraints from the coronavirus.
“With significant downward pressure on spot LNG prices and oil prices, it could be the double-whammy that really starts to make some projects seem uneconomic,” Jeff Moore, an analyst with S&P Global Platts, said in an email. “If oil prices stay low for much of this year, I would imagine it could have a material impact on supply projects looking to reach FID this year.”
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