Exxon's Pacific Gas Partner Sees LNG 'Revolution' Among Buyers
(Bloomberg) -- Exxon Mobil Corp.’s partner in a $15 billion liquefied natural gas export project in Papua New Guinea sees Asian buyers pushing back on the pricing and structure of LNG contracts as a glut of supply gives them greater bargaining power.
Oil Search Ltd., the Sydney-based producer which owns a 29 percent stake in the Exxon-operated PNG LNG development, sees signing traditional long-term deals "very unlikely" in the current market, according to Managing Director Peter Botten. The company plans to begin negotiations for new contracts next year, it said in a presentation Tuesday.
"We’re seeing a revolution in the LNG market right now," Botten said in a phone interview with Bloomberg. "With oversupply, which is likely to be the case for some years, customers quite rightly are using this opportunity to recalibrate what they pay and how they pay it and the structure of any future contracts."
Asian spot prices for LNG have slumped by about 60 percent since September 2014 amid a global glut and as the pace of demand growth slows. Japan’s Jera Co., a joint venture between Tokyo Electric Power Co. Holdings and Chubu Electric Power Co. and one of the world’s largest buyers of LNG, has said it won’t sign new contracts that restrict where it can sell the fuel and will boost its share of supply from spot deals while reducing its reliance on long-term agreements.
Historically, LNG has been sold on long-term contracts that guaranteed buyers supply and helped producers finance liquefaction plants at a time when less of the product was shipped. Twenty-eight percent of LNG traded in 2015 was on a spot or short-term basis, according to the International Group of Liquefied Natural Gas Importers. That’s up from 18.9 percent in 2010, according to the group.
Woodside Petroleum Ltd., Australia’s largest oil and gas producer, expects lower LNG prices as it renegotiates short-term contracts and says buyers across Asia will increasingly resist deals that restrict the reselling of the super-cooled fuel, Chief Executive Officer Peter Coleman said last week. Suppliers are being forced to offer lower prices for oil-linked LNG deals even as buyers demand more flexible terms amid the glut, he said.
To contact the reporter on this story: Perry Williams in Sydney at email@example.com To contact the editors responsible for this story: Ramsey Al-Rikabi at firstname.lastname@example.org Aaron Clark
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Operates 14 Offshore Rigs
- Guyana-Suriname Basin Emerges as a Hotbed of Oil, Gas Exploration (Nov 17)
- Hoegh LNG: Pakistan LNG Import Project Consortium Folds (Nov 16)
- Buying Texas Oil at New Mexico Prices: Majors Go West for Shale (Nov 14)
Company: Woodside more info
Operates 3 Offshore Rigs
- Chevron Starts LNG Output at Australia's Wheatstone (Oct 09)
- Global LNG: Faltering Supply Prompts Short-Covering Price Rally (Aug 11)
- Woodside Sees Output Growing 15 Pct Over Next Three Years (May 23)
Company: Oil Search Ltd. more info
- Papua New Guinea Government To Sell Stake In Oil Search (Sep 21)
- Oil Search Profit Soars, Focus On Advancing PNG Gas Projects (Aug 22)
- Oil Search Q3 Revenue Beats Forecasts (Oct 18)