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Asian LNG demand expected to swallow supply

Asian LNG demand to balance out supply

The price of liquefied natural gas (LNG) has been expected to drop as new projects coming online drive supply, Reuters reports.

Within the next two years, an additional 40-50mn tonnes of LNG are expected to be created annually through the new projects, mainly in Australia and the US.

However, the industry has also seen a growth in demand for the fuel, especially within the Asian market.

According to industry executives, the increase in demand should absorb the rise in supply.

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“For the past three years, we were told at every conference that we’ll have a gas bubble, that gas is oversupplied, that we won’t be able to sell LNG... but it’s a bubble that never came,” remarked Jean-Pierre Mateille, Vice President of Trading of Gas and Power at Total.

In 2017, China overtook South Korea as the world’s second-largest LNG importer, with Japan at the top spot.

China transitioned millions of homes from coal to natural gas-powered electricity and eating last year, in a bid to tackle air pollution.

“If we move away from the next one, two, three years, the industry is growing at 20 to 30 million tonnes every year but we’re not taking FIDs (final investment decisions) for that kind of volume,” noted Hadi Hallouche, Head of LNG at Trafigura.

“There seems to be a consensus that from two years onwards we have a (supply) crunch because we have under-invested in production.”

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