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As liquefied natural gas (LNG) plays an increasingly significant role in the transition to a low-carbon world, the market will become more volatile and risky, believes audit consultancy PwC’s strategyconsulting business Strategy&.
Further, the analysis suggested that gas prices would be influenced by oil prices for several years. “If oil prices stay low, so will gas prices. Existing contracts linked to oil will have to be worked through first but, even if oil and gas are delinked after these contracts are concluded, inexpensive oilcould psychologically have a dampening effect on all energyprices.”
Meanwhile, Strategy& also warned that the global LNGmarket was about to become inundated with new suppliers, with a supply glut forecast to continue, which would see oversupply forcing sellers to seek alternative markets and share more risk with traders hoping to exploit arbitrage opportunities. Some producers would likely cut oil prices to defend market share against LNG imports.
“LNG is a buyer’s market right now, especially with a glut ofnatural gas on the market. Buyers must negotiate the best deal possible and take advantage of lower prices to get gasinto South Africa at the lowest prices seen in many years,” said PwC Africa oil & gas industry leader Chris Bredenhann, commenting on the analysis,
“It is expected that this initiative will not only establish the delivery of the 3 726 MW of electricity capacity set out in the Ministerial Determinations, but will also act as a catalyst to the development of a natural gas industry in South Africa and provide the gas infrastructure which will be required when we have our own indigenous gas,” said Bredenhann.
He noted that in Africa, if the Mozambique LNGdevelopments were to go ahead, the players in that sector would have to carefully look at the costs and defend their positions with buyers of their gas and renegotiations could have a detrimental impact.(Source: Miningweekly)