Global major warns of LNG oversupply

globalWITH new LNG plants being developed in Australia, Europe, North America and Africa, a major player has warned of an oversupply risk, with future production soon to outnumber demand.
Speaking at a conference in Darwin, ConocoPhillips Australia vice president commercial Mike Nazroo said the tight supply currently being experienced could be short-lived, as new plants came online in reaction to upbeat predictions for the industry.
“In the longer term, capacity additions look set to catch up with – and even overtake – demand,” he said.
“Much of this supply growth is set to come from the Australian project wave, but there will be competing projects from North America, East Africa, Nigeria and Russia.”
Mr Nazroo referred to statistics from US global management consultancy firm McKinsey & Company that stated if just 50 per cent of all non-approved LNG capacity was built, there could be excess production by 2020.
“Therefore, we need to carefully consider how we invest and develop competitively here in Australia,” he said.
Conoco operates the Darwin LNG plant which converts gas from the Bayu-Undan field to LNG for sale to Tokyo Electric and Tokyo Gas in Japan. It is also building the Australia Pacific LNG plant at Gladstone with Origin Energy. While the Darwin plant has approval from the Northern Territory and Federal Government for three LNG trains, Conoco has not revealed any plans to expand beyond the current train, which first began exporting in 2006.
At the conference, Mr Nazroo said Conoco was already searching for other gas sources for the Darwin LNG plant. The plant was contracted for supply until 2023, which is when the Bayu-Undan field was expected to reach the end of its supply.
“Bayu-Undan will not produce gas forever, and the opportunity for other gas resources to use DLNG becomes a real option,” he said. Expansion of Darwin LNG and backfill could be an alternative to floating LNG development for fields in the Browse, Timor and Bonaparte basins off the coast of Darwin, but he did not say whether backfill would be required before the end of Conoco’s supply contracts.