They Might Be Giants: Emerging LNG Importers Are Reshaping the Waterborne Gas Market
For several years, many liquefied natural gas (LNG) market observers have been anticipating looser waterborne markets and lower prices. Primarily due to surging exports from Australia and the United States, new supply has been entering the market at an unprecedented pace since mid-2014, and this expansion is set to continue through the end of the decade. However, the physical LNG market does not appear to have loosened substantially, even though spot LNG prices are down from the lofty levels of 2011–14, following Japan’s Fukushima crisis.
The purpose of this paper is to demonstrate that physical LNG markets have remained quite tight in the face of growing supply and to examine an underappreciated driver of this tightness: enormous demand growth by a group of new and emerging LNG importers since 2014. Facilitated by an expanding fleet of floating storage and regasification units (FSRUs), these emerging importers have quickly upended the conventional wisdom that the LNG market has entered a period of structural oversupply.