Too Much LNG On The Market

[Tree]

It is settled fact that global LNG demand, moreso in Asia, will out pace current and planned supply.

There have been multiple innocuous posts to back this fact.

Not only is LNG demand soaring but depletion in existing fields (think ARUN) and geopolitical instability.

JP/SK seek safe diverse LNG supplies and PNG is showing it is advantaged over the competitors, including N American projects.

[Palm]

Another projected scenario; this for energy in 2030:

"Rising energy prices and greenhouse gas restrictions have reduced projected energy
usage, but total energy consumption continues to rise. Global oil production, after
reaching a peak of 93 million barrels per day in 2020, has declined to 80 million barrels
per day. To fulfill the unmet demand for liquid fuels, biomass production has jumped
dramatically. Coal consumption shows signs of peaking, but natural gas usage is up
sharply, as new technologies have made it possible to exploit the extraction of natural gas
from shale. Geologists, however, warn that natural gas production could peak within two
decades or less. Wind energy production has jumped dramatically in the U.S. and
Northern Europe, but increased reliance on natural gas for energy generation has slowed
the anticipated expansion of solar energy in the U.S. and elsewhere. At the same time,
the construction of new nuclear plants, particularly in the U.S., has been hampered by
escalating costs, regulatory barriers, and a shortage of capital.
Higher prices have spurred significant energy efficiencies in buildings and appliances.
As a result, electricity use has declined significantly in Europe, Japan and South Korea,
and modestly in the U.S, but the gains have been more than offset by increased electricity
generation in China, India, Southeast Asia and the Middle East. In total, developing
countries have accounted for 75 percent of the global increase in electricity generation.
Yet, despite that increase, more than 1.5 billion people in the world still do not have
access to electricity and the number is growing.
Hybrids and electrical plug-ins are steadily increasing their market share, particularly in
the U.S., but the number of cars and trucks on the world’s roads has surged to nearly two
billion, almost double the number in 2009. China now has nearly as many cars as the
U.S., and India is now the fastest growing car market. A leading car industry analyst
warns, however, that “the age of the automobile may be coming to an end.” In response
to higher fuel prices and growing shortages of gasoline and diesel fuel, the average
number of miles driven by car owners is falling, and car sales are plummeting.
China and India have emerged as major competitors for overseas energy supplies. As
their share of the world’s economic output has grown, both nations have been using their
export earnings to purchase overseas energy companies and sign long-term contracts for
the delivery of liquid natural gas (LNG) and biofuels. The extent of China’s growing
claim on overseas energy production is raising concerns about the energy security of
other nations. Experts warn the U.S., despite its increased production of natural gas, is
more dependent than ever on foreign sources of energy. A leading analyst has described
the world energy situation as a “powder keg ready to be lit.”

So if IOC's project starts producing when expected it and other projected projects likely will be selling into some pretty high demand. I remind people that in Australia not long ago the government thwarted an effort by a Chinese company to buy an Aussie coal producer. One of the gov't officials stated, "China is securing energy assets for the next centuries (plural)". If Japan is trying to lock up PNG resources for its own future use including its military needs, think how much more China is and will be doing the same as its own military expands. Then there's India.

[jdeo1969]

Demand will be there without a doubt. Japan needs energy, China will need a TON of energy.

[sydbod]

......... With many countries in Asia witnessing furious economic growth, ........

Palm, this is the part that I have issue with.

The only 2 countries that I can see from my travels that are growing happen to be China and India.

Thailand is currently going backwards. Vietnam is not a significant energy consumer and they are aquiring their own gas and oil off their coast (will not be a significant importer of energy). Malasia and Indonesia require oil rather than gas. Japan will be decreasing its gas imports over time rather than increasing them (they plan to re-establish nuclear power .... yes it will happen over the next few years). the other ASEAN countries are not significant.

China will increase its gas demand, but they intend to diversify their gas suppliers and plan to import HALF their gas demand from Russia over the next few years. To me this looks like they will be importing less LNG in a few years time rather than more.

India will increase imports, but it is not a big enough market to absorb all the new gas coming on line in the near future.

Hell, even the good old US of A is not doing so well no matter what the news reports are saying. The majority of the new employment happening there is part time work rather than full time work. The economic data I am being exposed to suggest that the man-hours worked per worker is not actually increasing at all, so the true measure of growth is actually stagnant there. USA will not be the growing demand market that the Asian countries require to grow significantly themselves.

Europe ... well it is mainly a basket case and looks like it will stay a basket case for many years to come.

Even my beloved Australia is on its way down the dunny pan (toilet for those that dont know) and we are going to have a hard time in the very near future.

I just don't see this bright future that will demand all this new LNG for a very long time to come.

Time for another scotch ... I am feeling depressed at the moment.

[Palm]

You may not but a temporary near-term blip has not changed most people's opinion that LT it will still happen. I have a very good friend who just left again for China. His firm is involved in building entire cities and all that goes with it all over China. I constantly talk to him about what is going on there in what he sees. China's middle-class will continue to grow and migrate to urban areas. They will buy more from Russia, but they will not be stupid enough to think that Russia is their "friend" LT. They will secure up to a certain amount from Russia, but know too much is dangerous. Temporary lulls in growth do not change a counties LT outlook and planning very much. These countries will secure more than they need to be SURE they have what they need. Witness SK's actions in even your first article (I believe). They secured more than they ended up needing and are now selling any excesses into the market. That happens as the world economy goes through its ST gyrations. But LT these countries will continue to war over perceived necessary resources as they grow and plan for future growth.

Then we have the ME situation which Tucker has been pointing out. At some point China will get involved in the ME directly as it seeks to secure energy resources. Watch and see.

[Palm]

"Time for another scotch ... I am feeling depressed at the moment."

That half-empty outlook may be doing this to you. Try some koolaid! Hohohohoho

[sydbod]

Palm, I agree that long term the future for energy looks very promising, but DAM IT, by 2030 I will probably be pushing daisies up from under the ground, or at least be in some nursing home having dribble wiped off my chin and having my nappies changed. It is not that I require any gains from my smaller IOC share holding to be comfortable, it is just that I would like to see this investment mature while I still have my mental faculties in place. For once in my life I want to have a share holding that just blows me away rather than just makes me feel happy with the returns.

[Palm]

Maybe this one just isn't it then. Warren Buffet usually stays away from commodity companies, but I don't think anyone here feels it will be 2030 before IOC brings very nice returns. I like your LT outlook as to when you might be dribbling, but long before that you'll likely be sipping bubbly. But you have to be happy with your investments to do that. I've cut many an investment loose and sometimes taken the lick of losses when my needs don't match what the company is doing. Much less painful and frustrating.

[jft310]

There is a consortium of banks that make LNG loans. They see almost all the same loans. Will they finance the high cost LNG builds in Australia or the low cost projects on PNG ?
If you were a banker would you prefer a margin of safety with higher margins vs expensive low margin plants in Australia.
The higher cost projects will NOT be financed !
Why did all of IOC's management leave Australia , they are in the LNG business and move to PNG?
It was not for option grants. Do footsteps speak louder than words. .Would not an industry insider know more!! And they have voted. Moved to PNG .
Notice these execs didn't move to another Australian project but moved to PNG .

[sydbod]

Palm, I know sometimes I come across as being possibly negative about IOC, but in truth that is just the way I am. In reality I am more than happy with my investment. Yes I am one of the lucky ones that came in at a significantly lower price than the current price and have made a pleasant little gain on the shares. I also am convinced that IOC has a bright future in the longer term around 2020 time frame, and therefore plan to hold my holding at least till then, no matter what the market does in the mean time with the share price, these market fluctuations just do not matter. "Please sir, I just want more". I want to be blown away, and not by a shotgun.
Had a nice bottle of Sparkling Moscato for dinner tonight, I don't believe in waiting for special occasions for the excuse to drink any form of "bubbly".