With the downturn in the global economy, demand for energy products has plummeted. Oil prices have deteriorated significantly, while demand for liquefied natural gas (LNG) has evaporated. American fracking firms in particular have been impacted by this global trend. The process of fracking and extracting LNG is more expensive than traditional methods of oil extraction. Combined with significantly lower energy demand, energy firms are finding it difficult to sell natural gas. Now companies are looking for new markets to sell their LNG.
A report from the International Energy Agency (IEA) detailed the changing nature of the LNG market. For now, the report argues, energy companies will continue to sell primarily in the robust European marketplace. However, this trend will likely change in the near future. While demand for energy products has fallen significantly, energy production has not decreased at a proportional rate. This has led to increased energy stockpiles, especially in the United States. As the global economy begins its major transition, LNG exporters will begin changing their focus.
The report says that LNG sellers will find buyers in East Asia in the near future. China has been a particular area of focus for energy companies. The world’s second largest economy has been consuming energy at an enormous rate, but its recent economic downturn has sent energy demand down 4 percent. The IEA believes this will recover with time and LNG exporters will soon enjoy increased sales in China. At the same time, India’s rapid economic growth will lead to a 6 percent increase in LNG demand over the next five years, according to the IEA. Additionally, emerging markets in Southeast Asia will likely demand more energy products as their economies continue to recover and expand.
Changes in the global economic landscape will shift LNG resources and sales from Europe to Asia, the report argues. Both Russia and the US are increasing their LNG supplies and production and are competing for sales in Europe. At the same time, Europe’s shift away from environmentally damaging petroleum products to environmentally friendly renewable energy sources will lead to lower demand for LNG overall. This, combined with the increased supply from the US and Russia, will lead to lower LNG prices and sales in Europe.
The IEA also argues that in addition to a change in LNG buyers, exporters of liquefied nature gas will also change. Currently Qatar is the largest exporter of this particular energy product, but that is set to change. The IEA’s report says that Australia may challenge Qatar for the top spot in the near future, while the US will also increase its output significantly. The IEA believes the supply of LNG will jump 45 percent through 2021, but demand for LNG will fall by 0.5 percent over the same period, leading to rapid changes in the global energy market.