Economic slowdown as a result off the global COVID-19 pandemic has caused a supply glut in the LNG market, as several operators have said they will delay their upcoming LNG projects. 

Operators are reducing their expenditures for 2020 to counter the impacts of COVID-19. For example, Woodside Energy and ExxonMobil have resorted to downsizing their capex by 60 per cent and 30 per cent for 2020, respectively. 

Elsewhere, BP has pushed the timeline for its Tortue FLNG project from 2020 to 2023 in response to the COVID-19 impact. Similarly, Qatar Petroleum has also postponed the project timelines of its Ras Laffan North Field LNG terminal development by a year to 2025.

Haseeb Ahmed, Oil and Gas analyst at GlobalData, said: “Due to the sharp fall in oil prices, spread between oil-indexed long-term LNG contracts and spot contracts have considerably reduced. This can make it challenging for LNG producers to meet their revenue targets. In addition, a rapid decline in gas demand is affecting financing of capital-intensive new liquefaction projects, leading to inordinate delays and capex reductions.”

He added: “A silver lining amid all the chaos induced by the pandemic outbreak is increased opportunities for new entrants to the LNG sector. Global LNG oversupply, as well as low LNG prices, might encourage new countries and companies to start importing LNG, contributing to LNG industry growth. Sustained low LNG prices will encourage several gas-importing countries to switch from coal and oil to cleaner natural gas.”

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6th May 2020