Supply Disruptions In LNG Can Create Major Price Volatility, Warns Expert

Australia and Qatar will come out to be the biggest suppliers of LNG to Asia till the end of the decade, noted Wood Mackenzie Lens.

Any supply disruptions or demand fluctuations can create major price volatility in liquefied natural gas (LNG), said APAC Gas and LNG Consulting at Wood Mackenzie’s vice president, Mangesh Dilip Patankar. Speaking in Singapore, Patankar noted that LNG buyers in Asia are navigating a very finely balanced market which can’t bear any fluctuations, else the direct impact will be felt on the price. 

According to a PTI report, the expert stated that the LNG market is at an important point and the uncertainty in outlook has left an impact on pricing and contract terms majorly. This has further increased the gap between buyer and seller aspirations. The gas buyers are constantly battling the challenge of ensuring a secure LNG supply and at the same time maintaining competitive procurement costs and flexible contractual terms, Patankar added. 

Australia and Qatar will come out to be the biggest suppliers of LNG to Asia till the end of the decade, noted Wood Mackenzie Lens. Australia will provide a supply with volumes over 886 million tonnes (MT), while Qatar will supply volumes over 827 MT. These will contribute to about 60 per cent of the total volumes of LNG delivered into Asia during the 2023-30 period. 

Patankar added that the LNG market is now seeing buyers, specially in Asia, re-emerging and keen to engage sellers, but they should remain cautious and comprehend the market’s ‘complex fundamentals and track it’s price volatility’. “As (LNG) buyers contemplate their options, it becomes crucial for them to evaluate the mix of pricing indices in their portfolio such as oil or Henry Hub and whether they should also take some exposure to spot pricing/spot purchases,” he said. 

Talking about the outlook of the market, Patankar noted that the new projects are not estimated to impact supply significantly until 2026, therefore the market ‘looks set to remain tight’. The LNG year-on-year (YoY) supply growth will average 40 million metric tonnes per annum (mtpa) annually from 2026 to 2028, the data from Wood Mackenzie Lens noted. 

This will help balance the global market, improve gas affordability, create better LNG availability for Europe, and ensure a resurgence of demand in Asia, Patankar added.