Buyers Hold Back on Big, Long-Term LNG Contracts
In a market development that raises new uncertainty for large-scale new infrastructure investments on Canada’s west coast, the world’s biggest liquefied natural gas (LNG) trader says buyers are looking for “shorter and smaller contracts,” Reuters reports.
Big infrastructure investments like the $36-billion plant that Malaysia state oil company Petronas has proposed near Prince Rupert B.C. generally require a few long-term, large-volume anchor contracts to secure financing. But those, Reuters reports, are getting harder to come by in a world with an LNG oversupply.
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“Royal Dutch Shell,” Reuters reports, “said new LNG customers that will drive demand are looking for shorter and smaller contracts.”
Much of the new LNG demand, the news agency says, is expected to come from countries that need to replace supply as their own domestic production fades. Buyers like Egypt, Pakistan and, significantly for Canadian gas producers’ hopes, China, “typically need more flexibility in their gas supplies due to uncertainty over demand evolution, meaning the historical contract structure of large volumes sold in multi-decade deals is changing.”