US shale could chop $20 from Brent

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18 April 2013

A Brent crude drop to around $80, expected in the next year or two, could decrease prices for countries looking to import LNG, according to Fereidun Fesharaki, chairman of Facts Global Energy, an affiliate of the Washington-based Centre for Strategic and International Studies (CSIS).

“Everything about LNG actually depends on the price of oil,” Fesharaki told an audience at LNG 17 in Houston on Thursday.

"If the price of oil is low, LNG prices are low. If the price of oil is high, then higher LNG prices need to use subsidies, and potentially weaker demand might be expected.”

“We are looking at a drop in the price of oil.”

Expected volumes of US crude production will combine to equal Kuwait’s oil exports by 2015, and as much as Kuwait and Abu Dhabi exports put together by 2020, Fesharaki said.

“This makes a big difference in the total picture,” he said.

He sees great potential for new LNG import markets including emerging economies like Thailand, Indonesia, Malaysia and the Philippines, with the potential for 100 million tonnes of demand from "non-traditional" markets, he said.

Still, he said he believes countries will learn US shale gas is not a "fantastic panacea" for their energy challenges and will come to "get numbers in line with the realities of the market".

He sees most of the growth in the LNG supply market coming from the US, Canada and Russia, with liquidity gaining momentum in the early 2020s as terminals come online.

Iran and Venezuela, he said, have the potential to become future gas "powerhouses" but have been “discounted for so long for political reasons”.

Markets such as Qatar and Australia have already maxed out much of their expansion capacity, he concluded, referring to the proliferation of massive LNG projects.

"The madness in Australia has to come to an end," he said in response to questions, calling the construction boom and high costs ultimately "unsustainable".