Demand Eases in the Face of Sustained Prices
August 2018
The short term will be characterised by upwardly trending gas prices, which could see Henry Hub based prices increase in the next 18 months. The rise is in response to new liquefaction capacity that will be coming online in the US, drawing on domestic stocks.

Into this context, AME expects that approximately 52Mtpa of new and renewed LNG contracts will come into effect in 2018. April to June trading is expected to exhibit some demand rebalancing, as new capacity begins to feed global markets. Counter-cyclical demand factors have pushed AME's average European composite natural gas price to an unseasonably high price, but over the September quarter we expect a moderate retrace down. 

 Short term northern summer demand will soften on seasonal factors. Although Chinese demand continues at record levels, European demand is finally reversing its earlier highs. The possibility of a new eastern Australian LNG market was boosted in July after Venice Energy announced its proposal for a combined FSRU terminal and 500MW power plant in Adelaide; it is the fourth Australian proposal put forward to date.

In terms of new supplies, with feed gas now flowing into Ichthys LNG and with the start of exports imminent, we are foreshadowing the possible start-up of Shell's 3.6Mtpa Prelude FLNG within months. Longer term, and following Korea's KOGAS MoU for participation in Novatek's Arctic LNG-2 in Russia, drilling has begun in the North Obskiy licence area for new feed-gas reservoirs that could provide additional support to the 19.8Mtpa proposal. In the US state of Georgia, the 2.5Mtpa Elba Island LNG was hit by a delay to its start-up; now expected in the December quarter.