17 June 2024

Energy industry perceive a strong demand post-COVID

| The European |

Following the COVID-19 crisis, the energy and gas industry has seen no change to the strong long-run outlook for demand. However, the industry expects a supply shortfall in the coming four years as the pandemic lockdowns and oil price collapse lead to delays on gas projects. 

Gas producers, buyers, liquefied natural gas (LNG) developers and a major contractor have openly expressed their concerns about the long run of fuel. Fuel will stll be needed to back up wind and solar power, replace coal-fired power, and produce hydrogen globally. 

“We see the need for substantial investment in new projects and new liquefaction,” Exxon Mobil Corp’s Australia Chairman Nathan Fay said at Credit Suisse’s annual Australian Energy Conference. 

However, lingering unreliability following the record crash in LNG prices this year, way below $2 per million British thermal units (mmBtu) means only the lowest cost LNG projects will go ahead, major producers said. 

At this moment in time, more than 140 million tonnes of projects worldwide have been deferred. In Australia and Papua New Guinea alone, five are on hold – Exxon’s expansion of PNG LNG twinned with Total SA’s Papua LNG, Woodside Petroleum’s Scarborough and Browse, and Santos Ltd’s Barossa. 

“It’s everything to play for – so a very bullish outlook on gas,” said Martin Houston, vice chairman of U.S. LNG developer Tellurian, which recently deferred a final investment decision on its U.S. Driftwood LNG project to 2021. 

Japan’s major contractor to LNG projects, Chiyoda said work has largely dried up and there would need to be stability in the market before developers move ahead with projects. 

“To be perfectly honest, we don’t see any green shoots right now,” said Chiyoda Oceania’s president Andrew Tan. 

Royal Dutch Shell sees short term concerns weighing on everyone’s decisions about new projects. 

“I’m sure all companies, all operators or producers across the globe are going to be focused on that affordability question just because of the uncertainty they see in the macro markets,” said Shell Australia Chair Tony Nunan. 

Research firm Rystad Energy said with gas prices around the world still trading near $2 per mmBtu, LNG developers with all but the lowest costs will hold off on new projects. 

“But that will again cause a shortfall for the LNG market four or five years down the road,” Rystad’s head of analysis, Per Magnus Nysveen told the conference. 


By Sonali Paul 

Sourceds Reuters 

For more Energy news follow The European Magazine. 

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