Oil price drop may affect LNG investment
Oil pumps in North Dakota. The recent oil price drop has important implications for future LNG prices and the viability of planned LNG projects. (PA)
Oil prices have dropped by around a third from their summer peaks, and rising output of light tight oil in the United States makes it unlikely that North Sea Brent crude prices will move out of the $80-90 per barrel range in the near term – even if OPEC pulls off a surprise in its 27 November meeting. Because oil prices constitute the indexation basis for around 70% of global LNG trade, the price drop has important ramifications in deciding which of the plethora of LNG liquefaction plants proposed around the world will go ahead.
Interfax published a special report, LNG: The 2018 Illusion, in April 2014 listing all of the LNG projects due to be commissioned before 2020. The report included the often highly ambitious published start dates for the projects, alongside Interfax’s own more conservative estimates. These projects were anticipated to add more than 300 mtpa to global LNG capacity by the end of the current decade – more than doubling it.