Liquefied Natural Gas (LNG) oversupply will last into the mid-2020s.
That is according to a new study from Aurora Energy, which says this is likely to dampen the value of contracts in the market as LNG hits the bottom of its boom-bust cycle.
The firm predicts weak demand is likely to prevent a swift recovery and rebalancing of the market could be stalled until 2025.
However, it also says there are opportunities for companies can to harness the value of flexibility in an oversupplied LNG market, for instance sourcing gas on the spot market while redirecting cargoes from their contracts to higher price regions.
Marc Hedin, Senior Associate at Aurora said: “Our study shows that the stakes are much higher than previously thought – flexibility can represent a premium of up to 40% of the contract value. Importantly, even if fundamental spreads were to disappear, flexible buyers still stand to gain substantially from short-term volatility.”
Growth in natural gas demand is forecast to slow to 1.5% per year globally by 2021.