Falling LNG Prices ‘Demolish Producer Profits’
Falling natural gas prices “will demolish producer profits as top Asian consumers freeze big purchases and rework or ditch existing import deals,” Reuters reported last week, based on research by U.S. investment bank JPMorgan Chase.
Based on 28 meetings with major liquefied natural gas players in Asia, “the bank spells out the changing strategies of the world’s top LNG importers—Japan’s JERA and South Korea’s Kogas—emboldened by surging supply to demand concessions from producers facing a decade of pain,” the news service reports.
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“These include breaking away from oil-indexed LNG supply deals, which tend to be costly, and abolishing restrictions that currently bar buyers from diverting or reselling cargoes.”
Spot prices for LNG are down more than 60% since February 2014, and could fall to $6 per million BTUs next year.
Last June, the International Energy Agency questioned whether British Columbia will be able to proceed with its much-touted LNG boom over the next five years. In July, Carbon Tracker reported that $280 billion in LNG projects, including $82 billion in Canada, could become stranded assets if the world’s governments commit to deep enough greenhouse gas reductions to avert runaway climate change.