Article - August 2010 Issue

LNG tsunami yet to reach its full extent, says IEA

While an unprecedented amount of new LNG liquefaction capacity is coming on stream in 2009-2010, this has not yet led to the big wave of new supply that it implies, says the IEA. Technology issues and upstream gas-supply constraints have kept actual output well below nameplate capacity. But for how much longer? In the agency’s latest medium-term oil and gas market review, the scenarios paint a worrying picture of a worsening gas glut – putting heavy downward pressure on traded gas prices – and continuing strength in oil price, ratcheting up the pressure on long-term oil-indexed gas contracts. Could the ongoing divergence of oil and gas prices mean the beginning of the end for such contracts? The IEA believes it might.

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