Tight LNG Market to Benefit Shell, TotalEnergies -- Analysis
By Jaime Llinares Taboada
Global demand for liquefied natural gas is expected to outpace
supply until 2025, and Royal Dutch Shell PLC and TotalEnergies SE
are best placed to benefit from this tight market, Jefferies says
in a report.
LNG consumption should grow at a compound annual rate of 5%
through 2030, and at 2% during the 2030s, Jefferies estimates. This
will be driven by new Asian importing countries, continued high
growth in Chinese demand and new transport fuel applications.
"We see gas as a key transition fuel for developing economies
with India and China being the biggest growth drivers, more than
offsetting demand decline in Europe, Japan and North America,"
Jefferies analysts say.
Combined with limited project start-ups in 2021 and 2022, this
should keep the market tight and spot LNG prices at an elevated
level in the medium term, the bank says. This will particularly
favor companies such as Shell and Total, which have a relatively
higher degree of exposure to spot pricing--as opposed to contracted
sales which remain under pressure by Qatar's aggressive
Shell has the best LNG business among the big energy companies,
according to Jefferies. The Anglo-Dutch group has the largest
production capacity portfolio and is expected to increase it by at
least 7 million tons a year by the middle of the decade. Moreover,
Shell has a low break-even point and the highest proportion of spot
LNG sales of all integrated oil companies. It also has the greatest
number of LNG carriers and holds equity stakes in three
TotalEnergies is seen as a close second. However, the French
company lags behind Shell in terms of LNG shipping capacity and ESG
credentials, according to Jefferies.
From 2025 onward, however, this should change, as a wave of
projects will be commissioned and new volumes will enter the
market, Jefferies says. Those include Shell's LNG Canada, Exxon
Mobil Corp.'s Golden Pass, Gazprom PJSC's Baltic LNG, and Qatar
Petroleum's North Field East.
As a result, the U.S. bank expects the market to become looser
from 2025 until the end of the decade, which will weigh on spot
prices for the super-chilled gas.
Write to Jaime Llinares Taboada at firstname.lastname@example.org;
(END) Dow Jones Newswires
July 06, 2021 08:53 ET (12:53 GMT)
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