The number of emerging players in LNG is making for a crowded field, Fitch Ratings says. Photo courtesy of Novatek
Dec. 22 (UPI) -- The markets for liquefied natural gas will likely be oversupplied over the next few years, leaving funding at a premium, notably for Russia, Fitch Ratings said.
"The LNG market is likely to be oversupplied for several years due to additional LNG capacity being commissioned in the United States, Australia and elsewhere, potentially resulting in depressed spot prices until demand catches up," the ratings agency said Friday.
The United States has pushed more shale gas into the open market in the form of LNG, hoping to eat into the Russian market share in Europe. Australia, meanwhile, aims to advance into the energy-hungry Asian market with gas from its giant Wheatstone LNG project. Russia's Novatek, meanwhile, set its foot into the global sector when it sent its first shipment of LNG to the market in early December.
The Oxford Institute for Energy Studies last year found Russian energy company Gazprom could compete with LNG from the United States if it decided to engage in a price war. The study at the time said the price for Russian gas exported through pipelines to Europe was discounted to U.S. LNG by as much as $1 per million British thermal units.
This year, commodity pricing group S&P Global Platts said gas prices in Europe were too low to support U.S. LNG imports. The report added, however, that contracts from companies like Gazprom may have been "tinkered with" to make piped gas more competitive.
Fitch said in its report that Russia has been able to improve its position on the global LNG market, especially with Novatek's recent shipment from its Yamal LNG project. Novatek could secure some funding support from partners not already the target of U.S. sanctions and by establishing partners with companies in rich countries like Saudi Arabia and India.
Globally, Fitch said securing long-term contracts for any of the major LNG players will be challenging as the field gets more crowded. Russia may therefore be at a slight disadvantage because of Western sanctions.
Bankers in China, the world's second-largest economy, have provided funding for Novatek's efforts, but there's no guarantee Beijing will continue to help. China, Fitch said, is considering LNG projects in Alaska, a gas pipeline from Central Asia, a second LNG effort in the Russian Arctic, as well as Gazprom's Power of Siberia gas pipeline "and it may not necessarily get involved in all these projects simultaneously."