LNG faces yo-yo effect in supply and demand

The liquefied natural gas business faces many years of imbalance in supply and demand, a leading industry figure has warned.

BG North America senior vice-president Betsy Spomer said there could be an initial period of a few years when production outpaces demand, followed by a supply crunch, possibly starting in 2012.Ms Spomer said a surge in global LNG production capacity over the next three years was coming at a time of shaky demand and may encourage a buyer’s market in the product for a few years.

LNG supplies are forecast to rise 50% to 275m tonnes between 2009-2012, as new projects in Qatar, Indonesia, and Russia come on stream.Much of this will come from Qatar, which recently confirmed it was on track to double its capacity by 2011-2012 to 77m tonnes.

At the same time, expectations for the increase in short-term demand, particularly in the US, have been retreating.

For example, the US Energy Information Administration has this week again reduced its forecast for the nation’s 2009 LNG imports, this time to about 400bn cu ft from the prediction of 410bn cu ft a month ago. At the beginning of this year, the administration forecast that 2009 imports would reach 1,179bn cu ft.