Surging LNG prices risk destroying demand for the super-chilled fuel and triggering a "bloodbath” in global markets, according to Malaysia’s Petroliam Nasional Bhd. Chief Executive Officer Tan Sri Tengku Muhammad Taufik Tengku Aziz.
The LNG market "is going to be a very, very, very, very tight market” this winter, particularly if Europe’s gas storage that’s at a multi-year low ahead of winter season "gets more compromised,” Taufik told reporters Monday on the sidelines of the Energy Intelligence Forum in London.
"We want to avoid a situation where we have a bloodbath in LNG markets,” when soaring spot prices begin to chip away at longer-term demand, he said.
Asia, home to many of the world’s largest LNG buyers, is facing one of its biggest supply shocks in recent years after the war in Iran and near-closure of the Strait of Hormuz choked off shipments. The disruption threatens to intensify competition with Europe, where gas inventories are at their lowest since 2009, for alternative supplies from the US and elsewhere.
Asia-Pacific has about 38 billion cubic meters of underground gas storage capacity, mostly in China, and relies more heavily on LNG tank storage, according to the International Energy Agency. Europe has about 150 billion cubic meters of underground capacity, roughly 70% of it in the European Union.
Asian buyers paying about $25 to $28 per million British thermal units for LNG "aren’t flinching yet,” Taufik said. "And I don’t know where it stops, and if it hits $40 to $50, people may start switching to other less sustainable, less responsible” forms of energy.
"We don’t want demand destructed,” Taufik said.
Asia’s heavy reliance on imported energy has left it particularly exposed to the Middle East conflict. Some countries previously sourced about 60% to 70% of their LNG imports from the Middle East, Taufik said earlier during the forum.
He called for opening more acreage to exploration and developing enough new supply to do more than simply offset declines at existing fields.
"I’m not so sure Asia is going to be able to be resilient beyond 2027, at least because there’s not the wealth of reserves or storage that some of the more prescient nations such as Japan and China will build up their SPRs,” Taufik said at the session. - Bloomberg
