The Gas and LNG Business in the Light of COVID 19
| Date | 01 August 2020 |
| DOI | 10.3366/gels.2020.0035 |
| Pages | 241-244 |
| Published date | 01 August 2020 |
Regardless of uncertainties concerning the extent or pace of moves towards a low-carbon future, the role of natural gas and LNG as an enduring participant in that future had seemed assured. Over the last decade natural gas has displaced coal and oil consumption in the large consumer markets of China and India, penetrated the energy markets of new jurisdictions such as Pakistan and the Philippines, and adapted its traditional structures, relationships and contractual arrangements to take account of new sources of supply and fulfilled a leading part in the changing world of energy.
The pace and scale of change in the international natural gas business, and particularly the LNG sector, has been remarkable over recent years. The development of aggregators, the influence of commodity traders and moves towards floating facilities and smaller-scale developments have had their effect, as has the move of the US from a position of major LNG importer to leading LNG exporter. The previously segregated, regional markets for natural gas and LNG have moved closer together and whereas the development of a global gas price (akin to the global oil price) still seems some way off, the growth of hubs and integrated prices and markets is undeniable.
But even more significantly, the move from hydrocarbons to electrons has been accelerating across the globe and indications are that the effects of COVID 19 will not put a brake on that acceleration, and may indeed increase it. In any event, these trends and events will have an effect on gas and its markets, as well as those of oil and other fossil fuels.
Coincidental with the COVID 19 pandemic has been an oversupply of gas and LNG and historically low prices in each of the three main pricing regions of the world for gas and LNG; Asia, Europe and the Americas. Whether these events have arisen as a consequence of COVID 19 or as a consequence of geopolitical movements among China, Russia, Saudi Arabia and the United States in relation to oil, the short-term effect has been one of distress for many buyers under long-term arrangements which are not hedged. And at such times, parties will tend to search their agreements closely for provisions entitling relief from the consequences of failure or, less likely, provisions which recognise the effects of hardship and provide for consequential amendment of the relevant agreements.
As world economies stutter to absorb the effects of the COVID 19...
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