LNG the prices must return – it is the cycle!

The global price of LNG is being driven by several large projects coming on stream at the same time, each with some production to be sold at spot. This increase capacity when coupled with reduced demand caused by Covid-19 is seeing LNG being sold at prices which cannot and will not continue. Demand will recover. We will consume existing projects reserves and new reserves will need to be developed. This will only occur when a commercially viable price is seeing to be available the project. What we are seeing in LNG is part of the “boom/bust” cycle occurs across the energy and resources sectors as new projects all eye same demand and result in oversupply. LNG will be a critical part of the energy mix for many years to come. Investment in LNG results in the building of long-term infrastructure. The long-term nature of these projects is highlighted by the decision by Petrochina in April, despite the lowest prices in memory, to commit to the first phase of its Australian gas project which is the cost $10 billion. It is time to recognise current prices are an aberration and smart businesses would be locking in at long-term rates of USD 7, or less, per million Btu. This should include Australian companies wanting to secure low-cost energy.

Paul Raftery / www.paulraftery.com.au