Forbes: CNOOC's Second LNG Tender Signals Massive LNG Market Shift

What a difference just over a year can make. From a seller’s market with outlandishly high prices and somewhat limited supply, the liquefied natural gas (LNG) market in Asia has companies and countries that were scrambling to lock in long term 20-year supply agreements now unloading these very cargoes they sought so hard to obtain. The latest development came at the end of last week when one of China’s three state-owed oil majors, China National Offshore Oil Corporation (CNOOC), announced a tender to sell an LNG cargo from BG Group’s Queensland Curtis LNG facility, one of Australia’s new LNG projects in which it has a stake. In September, CNOOC tendered its first LNG cargo from the project.

CNOOC’s decision to sell its cargo on the spot market signifies what’s unfolding in the LNG market, particularly in the Asia-Pacific region, which accounts for two-thirds of global LNG demand. LNG markets are awash in supply while even more LNG will enter the market soon, mostly from Australia and the US. This over supply has forged with two other market dynamics – less consumption from the world’s top two LNG importers, Japan and South Korea, respectively, and also from Taiwan, and China, two other large LNG customers. The plunge in oil prices of more than 50% since mid-June 2014 is the other shaker and mover in the LNG market, particularly significant since LNG prices in Asia are usually linked to oil prices. Singapore (Asia’s fledgling LNG trading hub) however, is seeking to replace LNG’s oil price linkage. Singapore-based Pavilion Energy said last month that it plans to start placing trades using the Singapore LNG Index Group (Sling) in the next few years. MORE