CERAWeek - Lower LNG prices should boost gas demand, executives say

(Reuters) - LNG prices have fallen about a third over the past nine months, propping up demand, which should tighten the LNG market in the near-term, executives said at the CERAWeek energy conference.

LNG prices have tumbled as supplies have swelled. LNG for April delivery into northeast Asia was at $8.60 per million British thermal units (mmBtu) last week, its lowest since April 2021.

Executives from companies including Chevron and trading firm Trafigura estimated that the decline in prices will likely spur greater demand, while Wael Sawan, the CEO of Shell, said demand is already increasing as a result of reduced prices.

"It's a pretty trite thing to say, but low prices fix low prices," said Richard Holtum, global head of gas, power and renewables for trading firm Trafigura.

"Gas prices are so low here, it's a competitive advantage" he said.

Surging U.S. gas supplies and low prices have led companies to propose several new LNG export plants. The flurry of new proposals in turn prompted U.S. President Joe Biden's administration to pause its reviews of permits for the export plants, concerned so many new projects would undermine his pledge to cut U.S. greenhouse gas emissions.

The permit review pause will undermine U.S. dominance in LNG exports, said Mike Sommers, president of industry trade group American Petroleum Institute, said on Monday.

“We're losing market share to other countries as a consequence of the LNG export pause," Sommers said.

Amos Hochstein, a White House energy advisor, defended the pause given the huge increase in U.S. gas exports since they began in 2016. The U.S. exported a record 8.6 million metric tons (MT) of the superchilled gas in December and 8.3 MT in January.

“We’re just going to take a look at what is the speed, while not affecting the existing projects,” Hochstein said.

The second half of the decade will lead to a 40 percent increase in global LNG output, said Trafigura's Holtum.

Gunvor Chairman Torbjörn Törnqvist, meanwhile, estimated LNG supply will jump by a third over the next five years. He said there is not currently any tightness in the market and that gas prices are likely to remain low given the abundance of supply.

Patrick Pouyanne, CEO of TotalEnergies, a leading exporter of US LNG, echoed expectations for a increase in supply in the later half of the decade.

"It will be very good for the buyers, good for the customers and we will have the next generation of demand," he said.

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