Japanese buyers hold the key to LNG market
Denki Shimbun, The Electric Daily News.
March 28, 2016
Who was cited:
Dr. Fereidun Fesharaki
Dr. Fereidun Fesharaki, Chairman of FGE, was recently interviewed by the Denki Shimbun. He indicated that there is as much as 80 mmt of LNG in the market which remains unsold to end- users. The market is currently facing a severe shortage of buyers.
At the LNG Supplies for Asian Market 2016 conference held in Singapore on March 15, Dr. Fesharaki mentioned that he expects Japanese buyers to hold the key to the market as they have 35 mmt of upcoming contract renewals from 2019 to 2025, which is the world’s largest uncontracted volume. Dr. Fesharaki is well-known internationally for pioneering oil and gas market analysis and studies of the Asia Pacific/Middle East energy markets, and has authored many books.
In the interview, Dr. Fesharaki stated that while LNG suppliers want to bring many new LNG projects to FID, huge volumes of unsold LNG are already flooding the market. “Middlemen” including traders hold most of these volumes. They are contractually obligated to buy LNG, but are unable to find end-users. He expects the market to balance only over the next decade.
Dr. Fesharaki also mentioned that currently spot LNG prices are substantially below long-term prices, and that Japanese buyers should take advantage of this.
In particular, Japanese buyers should only be interested in contracts with full destination flexibility, and limit the length of contracts to five to ten years.
Translation by FGE