Global energy consultancy Wood Mackenzie (WoodMac) has released a report noting the six trends predicted for 2022 in the global gas and LNG sector.
As a trusted source of commercial intelligence for the world’s natural resources sector, WoodMac aims to empower clients to make better strategic decisions.
On 13 January, the consultancy released a report on the global trends it predicts for gas and LNG.
WoodMac has forecast a bumpy year ahead for gas prices, stating a key determinant as the start0up of Nord Stream 2.
Analysis suggests that at current levels of Russian exports, European storage inventories will reach below 15 billion cubic metres (bcm) by the end of March – a record low.
“The commissioning of Nord Stream 2 might well be the only option to refill storage and avoid a repeat of the last year’s winter crisis,” the report reads.
Oil-indexation levels are predicted to rise, potentially reaching 12 per cent on a weighted average basis. 2022 may be a turning point for LNG oil-indexed contrasts with the level of indexation firmly on the rise.
Asian LNG spot prices are expected to reach US$15 mmbtu over the next five years.
“We expect LNG contracting activity to remain strong in 2022. Chinese buyers are again expected to lead the way and account for most of new long-term contracts signed,” said Vice President Valery Chow.
“On the other hand, we expect more muted activity from Japanese buyers. Despite high spot prices, long-term contracting for Japan is anticipated to continue softening in the face of energy transition uncertainties and greater confidence in the trading capabilities of the major buyers.”
WoodMac expects high momentum behind new LNG projects, with 79 million tonnes per annum (mmtpa) of additional LNG to take final investment decision (FID) over the next two years.
WoodMac also said that the industry will shift its attention from offsetting carbon emissions to producing material carbon reductions following the low quality and cost of offsets.
Global gas demand will remain resilient in the short term, but the role of gas in the energy transition will come under pressure as prices remain high.
Finally, gas could be considered a transitional investment in the EU taxonomy.
Financial and non-financial investors will be able to increase their corporate “green scoring” by investing in gas, including outside Europe, but this will not be a solution for the gas industry.
“But the EU recognition of gas power plants as a transitional investment is no panacea for the gas industry,” Vice president Massimo Di Odoardo said.
“Gas prices will need to come down to accommodate increased investments in gas use. And investments in gas infrastructure remain firmly outside the scope to classify for green credentials, let alone investments in supply. The road for gas to establish its role in the energy transition globally remains uncertain.”
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