From Bloomberg:
For LNG buyers, 2040 is beginning to feel even further away.
Just a few years ago, faced with limited supply and relentless demand growth, liquefied natural gas buyers were happy to lock in contracts that ran through nearly the middle of the century, often paying prices linked to the cost of oil. Now, as the market moves deeper into oversupply, being tied to a producer for the next two decades is shifting from a blessing to a curse.
Less than 15 percent of long-term LNG supply contracts will expire in the next five years, according to data compiled by Bloomberg. Meanwhile, new projects in Australia and the U.S. are saturating the world with LNG, depressing spot prices this year in Asia’s energy trading hub of Singapore even as oil has risen about 20 percent. That’s giving buyers the incentive to try to renegotiate their deals with suppliers, according to analysts at Citigroup Inc. and Energy Aspects Ltd.
“Serious tensions will be seen in the market when oil starts transitioning to higher levels, driving contracted gas prices upwards,” Trevor Sikorski, an analyst with Energy Aspects in London, said by e-mail. “At the same time, the LNG spot market should stay low — and that wider gap between the two prices will mean a number of buyers unhappy with that spread and this will drive calls for renegotiation.”
