IEA Says Questions Linger on Who Will Scoop Up New LNG Wave

(Bloomberg) -- The global market could absorb a record wave of new supply of liquefied natural gas, but much depends on net zero policies and renewables growth, the International Energy Agency said. 

The IEA said it revised up overall gas demand in its World Energy Outlook published Wednesday, but “questions still linger about where all the new LNG will go.” 

Global LNG capacity is set to rise by about 50% by the end of the decade — the biggest build-out in the industry’s history — with suppliers and market watchers trying to gauge how deep and how long an anticipated glut could last, weighing on prices. 

The IEA details several scenarios in its outlook, assuming different paces of energy transition and climate goals. The most bullish for gas demand — the so-called “current policies scenario” — sees global LNG appetite rising in line with supply until the end of the decade and even slightly exceeding already planned export capacities by 2035. 

However, the “stated policies scenario” sees stronger renewables growth, resulting in LNG oversupply in 2030, gradually disappearing only by 2035. 

This period of LNG surplus creates risks for companies investing in new projects, with the US — the most flexible supplier that will add most of the capacities — having the greatest exposure, according to the report. Elsewhere, older plants with relatively high operating costs may not be competitive.

China is another “wild card” for the market, given its deepening energy ties with a major pipeline gas supplier, Russia, and uncertainty on the country’s LNG demand, the IEA said. 

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