Russell: LNG Buyers Should be Wary of Getting What They Want

Demand growth in Asia has also been lower than expected, especially in China, which bought 17.8 million tonnes in the first 11 months of last year.

While this is 14.5 percent higher than the same period in 2013, LNG producers have been banking on substantially higher growth rates for Chinese demand in order to soak up the output of Australia's seven new projects, as well as those under construction in the United States.

While buyers now enjoy the upper hand, they should be wary of shifting the market to more of a spot and short-term contract model.

This will only work if your expectation is that LNG will remain in surplus in perpetuity, and this is almost certainly not the case.

It's yet to become a flood, but already new projects are being put on ice.

If I was a betting man, I would say that no new projects will take a final investment decision in 2015, and maybe none will be approved until the oil price recovers.

This means the next wave of proposed LNG plants in both the United States and western Canada has little chance of going ahead.


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