Cheap LNG may lure 50 more nations to gas – Wood Mac report

The number of LNG importers may more than double as a glut damps prices and encourages nations to ditch crude, according to Wood Mackenzie Ltd.

More than 50 countries may switch to LNG, with demand from new importers accounting for about 150 million metric tons per year (7.2 Tcfg) by 2025, amid an oversupply of the fuel and tankers to carry it, according to Noel Tomnay, vice president research global gas and LNG at the consultant. That is about 61 percent of the current global market.

“The opportunity is going to become increasingly compelling for markets to switch in to gas,”Tomnay said.

Egypt, Jordan and Pakistan increased the number of LNG importers to 34 last year, helping offset the first decline in Asian purchases since 2009, according to the International Group of LNG Importers. Markets are forming as countries consider switching to gas from crude after prices for the fuels diverged, with spot LNG in Japan sliding 45 percent this year as Brent oil gained 35 percent.

While markets such as Bangladesh can easily turn to LNG, most of the new entrants, including El Salvador, Ghana and Kenya, would be switching from naphtha, diesel and fuel oil and require investment in infrastructure, such as new pipelines and power plants, Tomnay said.

LNG suppliers from French energy company Total SA to trading house Noble Group Ltd. have said they are looking at emerging markets for future demand growth. While it will be harder for trading companies to enter new markets due to financing constraints, they may benefit from relationships formed supplying oil to those markets, Tomnay said.

To help the countries start imports, some suppliers may offer one-stop solutions and develop partnerships for building infrastructure, Tomnay said. Floating power plants may be used to allow a re-gas facility to operate alongside generators, he said.

Long-term contracts will be needed to support the construction of infrastructure, and governments in most of these markets would prefer a link to oil as a “default position,” to avoid risks associated with other indexes, he said.