Fundamentals getting better all the time
A well known LNG glut to 2015 has evaporated as Japan struggles to offset lost nuclear power with both oil and gas imports. Secular demand beyond 2015 is also rising and at extremely attractive prices. India’s Petronet, the country’s leading operator of LNG regas assets in country, projects that, despite a sizable offshore discovery, LNG will provide 40-55% of demand by 2015 — versus 21% in 2010. (all natural gas supplies about 10% of India’s energy needs, versus 14% for the rest of world) Customers are happy to sign long term contracts at regional oil-linked prices, and are considering importing Russian LNG from the Arctic (!). An added benefit, especially in AsiaPac, is that Shell’s Floating LNG (FLNG) concept is now in development mode, offering much better LNG economics, justifying smaller resources, as well as the flexibility to move from depleted fields to other opportunities. This has significant implications for (e.g.) associated gas and high decline opportunities. Lastly, a reminder from the Indian gas interests, a comment that not only will the country’s demand for coal continue at a high level (supplying over half of fast growing electricity needs), but the quality of most domestic coal is very poor – and this will not suppress consumption trends.