21 October 2014
The looming gas glut?
Companies around the world are spending billions of dollars in a scramble to start exporting ever-greater amounts of natural gas with hopes of feeding a seemingly insatiable appetite for the clean-burning fuel. There's just one problem, which could affect everybody from New Orleans to New South Wales: The world may already have more than it needs.
So much natural gas export capacity has already come online -- and there's so much more in the pipeline -- that it risks swamping what demand there will be for the stuff.
Qatar, Australia, the United States, and Canada are all aboard or jumping onto the liquefied natural gas (LNG) bandwagon, but it's unclear just who will buy it all and at what price. That has companies from Exxon to Australia's Woodside Petroleum rethinking their ambitious gas-export plans and countries from Mozambique to Canada angling to craft incentives to reassure increasingly gun-shy natural gas investors.
"The amount of supply that we have in the works already coming online in the next five years exceeds reasonable assumptions of demand growth," said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University.
Fear of a gas glut, coming just after the world began scrambling to take advantage of what the International Energy Agency (IEA) calls the "golden age of gas," underscores the cyclical nature of a business reliant on huge upfront investments and lengthy lead times.
That creates the risk of a boom-and-bust cycle where companies rush to meet projected demand, then panic after everyone else does the same. Goldman Sachs said earlier this month that oversupply could put a number of currently planned, high-profile LNG projects at risk.
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