Reference News Network, November 24 report: An article titled "The World Will Face a Surplus of Natural Gas: Will Prices Plunge? What Will Happen to Russian Exports?" was published on the website of "Rossiya Gazeta" on November 2. The author is Sergey Tikhonov. The following is a compilation of the content:

The EU took a long time to agree on a plan to gradually abandon Russian gas from 2026 to 2028 in the 19th round of sanctions, which is no coincidence. At this time, the global liquefied natural gas (LNG) market is expected to see a surge in supply from countries such as the United States and Qatar. A large amount of new capacity entering the market at the same time may lead to an oversupply of LNG. Commodity surplus will inevitably lead to falling prices.

It is expected that during the period from 2026 to 2028, U.S. LNG production will increase by 30 to 45 million tons, reaching 116 to 131 million tons per year. Qatar also plans to increase its capacity from 77 million tons to 126 million tons between 2027 and 2030. In addition, new projects are starting in countries such as Canada, Mauritania, and Senegal, and Russia is not going to sit idle. Russia still has plans to launch new LNG plants. For example, a chemical complex with an annual production of 13 million tons of LNG is being built in Ust-Luga. For comparison, Russia's total LNG exports in 2024 were approximately 33.5 million tons.

Ivan Timonen, a senior manager at the consulting company Implementa, stated that by early 2027, a new batch of LNG plants around the world are expected to come online, with a total capacity exceeding 80 million tons, accounting for about 20% of the current market volume. Such significant growth will put pressure on prices, but it will not cause a crash, because the economic conditions of the least efficient suppliers will continue to support prices. According to this speculation, the average price in European and Asian markets in 2027 is expected to be around $350 per thousand cubic meters.

At the same time, Alexei Grivachev, vice chairman of the Russian State Energy Security Fund, pointed out that the possibility of long-term low prices is not high. For most new LNG projects, the break-even point is far higher than $250 per thousand cubic meters. A drop in prices would in turn stimulate demand from Asian countries. If this process can be combined with the implementation of coal reduction plans, the time of LNG supply surplus will be short. Of course, this depends on whether various unexpected events occur. A tsunami in Japan once interrupted the country's nuclear development, leading to the first wave of price increases in Qatar's LNG.

Additionally, Maxim Markov, partner at Capita and head of the oil and gas services business, reminded that two systemic drivers of LNG demand should not be ignored: economic growth and weather. Long cold winters and long hot summers could lead to increased demand, and accelerated economic growth would have the same effect. It is expected that prices will experience a structural decline, but the LNG market is a complex equation, and price decisions are in a continuous dynamic change.

Grivachev believes that the current global situation has a relatively small impact on Russia. In the context of market volatility, sanctions and restrictions on Russian energy transportation have a greater impact on the prospects of Russian projects.

Timonen holds a similar view. From the perspective of supply costs, Russia's existing and new LNG plants have strong competitiveness, which is largely due to relatively low feedstock gas costs. Therefore, the expected price level is sufficient to cover operating costs and ensure investment returns. He believes that under these circumstances, the main issue for the Russian LNG industry is how to ensure capacity utilization under sanctions—signing contracts with new consumers and providing a fleet guarantee.

Markov explained that if Russian LNG is excluded from the European market through non-market means, other producers will fill this gap, mainly the United States and Qatar. Russian LNG will seek market space in the Asia-Pacific region and developing countries. That is to say, the LNG market will be largely artificially divided.

Timonen pointed out that the LNG plants in Australia will be the most affected by the price drop. Markov agreed with this. He believes that projects with the highest unit operating costs may face risks, first of all those in Australia, Malaysia, and Indonesia. (Translated by He Yingjun)

Original article: https://www.toutiao.com/article/7576196204247007780/

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