Hellenic Shipping News: LNG market could get worse before it gets better

9 June 2017: ” “Basically, we don’t see people covering all of their liquefaction costs,” said Jason Feer, head of business intelligence at energy industry consultancy Poten & Partners.” “U.S. exports are “very expensive today,” Feer said.” “Poten & Partners does not expect U.S. LNG export plants to reach full utilization for six or seven years, Feer said.” “Until demand catches up with supply, “there’s a real scramble to find homes” for the surplus, Feer said” “The credit quality of buyers in new markets will be “a gray issue,” Feer said” “Lacking the traditional 15- and 20-year deals of the past, project developers — their banks and other lenders — will need to get “a lot more innovative in fundraising,” Feer said.” ” “With the delay in project FIDs (final investment decisions), no sponsors have attempted to test the shifting market and based a multibillion-dollar project financing mostly on shorter-term contracts for offtake/tolling from sub-investment grade companies,” said a March report from Poten & Partners. “It is unclear how much flexibility there would be in liquefaction project financings to adapt to this change.” ” “Feer shared the same concern over a lack of investment decisions for new projects to come online in the 2020s.” “In addition to supplying new demand, there is opportunity in the marketplace to win over buyers as their long-term contracts expire in the 2020s, Feer said.” ” “We’re at the beginning of this process of market restructuring,” Feer said. “Buyers are faced with many choices, maybe too many.” ” ” “We see a lot in Asia, companies with 10 years left [in their contract) going to their suppliers and trying to get any benefit they can,” Feer said.” To read full article, click here.