Foster Natural Gas Report
BENTEK SAYS LACK OF DEMAND IN U.S. FOR LNG DUE TO DOMESTIC SUPPLY OF SHALE GAS HAS SHIFTED THE DYNAMICS OF THE WORLD MARKET; PREDICTS LOW U.S. LNG IMPORTS OVER THE NEXT FIVE YEARS AND THE GULF TURNING TO EXPORTING

Friday, September 24, 2010

Due to the growing domestic supply from shale gas, the U.S. did not become the liquefied natural gas
(LNG) market many expected in the last couple of years, asserted BENTEK Energy, LLC in its latest report, The LNG Market: New World Order. U.S. shale gas has cut import needs, resulting in a global oversupply of LNG and lower world gas prices. The dramatic U.S. market dynamics have affected “every corner of the globe and every sector of the global gas industry,” from supply to demand to transportation and prices, the report stressed.

Worldwide LNG shippers have found “surprising demand growth” in emerging and traditional world markets, especially in Europe, which is relying more on LNG as an alternative to oil-indexed pipeline gas. “The global LNG market has become more dynamic and flexible with a multitude of new participants,” the report noted.

Furthermore, the LNG industry has effectively linked the rest of the global gas market much closer to the
U.S. gas market. Major LNG players are buying stakes in U.S. shale, ensuring that changes in U.S. gas production affect not only U.S. gas prices, but also gas prices in other parts of the world.

“Not only is the U.S. effectively exporting its abundant shale gas by displacing LNG imports, it also is exporting its low gas prices, which is helping to drive up global gas demand,” the report observed. “Every new molecule of U.S. shale gas is sending ripples to markets in Europe, Asia and the Middle East.”

In the U.S., BENTEK sees a “weak outlook” for LNG imports over the next five years. The U.S. “will remain the most extreme market of last resort” and imports will remain largely a peaking supply source. U.S. LNG terminals are expected to operate at only 8% of total sendout capacity over the next five years. North America, in general, is projected to remain oversupplied with natural gas and subject to downward price pressure for the next five years. These market conditions, notably, “could lead” to U.S. LNG exports from several Gulf Coast terminals, BENTEK said.

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