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Energy Stat of the Week by Justin Jenkins

Energy Stat: Global LNG Landscape Still Suggests Near-Term Oversupply, But Mid-2020s Looking More Optimistic - Are We Nearing a "Second Wave" of U.S. Newbuild FIDs?

February 11, 2019

As readers of our research are aware, we are emphatically not bulls on North American natural gas, a market where excessive supply increases are outstripping otherwise healthy demand growth. But what about gas outside North America? While there is currently still a hodge-podge of regional gas markets, over time we expect a more cohesive global market to develop. LNG is fungible, and as logistical constraints are lifted we believe it will eventually become relevant to think about global LNG in the same way we typically think about oil: total supply and total demand. In this context, we still envision the LNG market being oversuppliedthrough 2022 - in contrast to the persistent undersupply we forecast for the oil market. However, the mediumterm picture has become significantly more optimistic, and if we look at only those projects that have reached a final investment decision, we now expect a notable undersupply to develop by 2024. Considering the four-year (minimum) lead time on these large-scale projects, we are anticipating several more U.S. LNG export FIDs in 2019, beyond last week's announcement by the Exxon/Qatar JV. In today's Stat, we outline: (1) our global supply/demand model and underlying assumptions; (2) the outlook for several developing U.S.-based projects; and (3) key risks to our bullish thesis, namely factors potentially muting European and Asian demand growth.