The emergence of major LNG buyers led by China and the increased production and exports from the U.S., are changing global natural gas markets, the International Energy Agency (IEA) said in its third annual Global Gas Security Review released Monday.
According to IEA’s Review, the evolution of the global natural gas market, driven mainly by LNG demand, continues to reshape the relationship between buyers and sellers, and leads to new challenges for the global security of energy supplies.
For instance, the review noted that China’s supply shortfall last winter caused many effects around the world, and showed the changing role of LNG in improving global gas security and flexibility of supply.
“As for Europe, the response to unplanned gas supply outages also showed the success of integration and emergency policy measures,” it said.
However, despite the improvements in LNG flexibility, uncertainties remain for the future evolution of gas markets, the review added.
This it says includes a risk of insufficient investment in production and infrastructure capacity, or questions regarding future shipping capacity growth.
“These uncertainties could have an impact on price volatility and hurt consumers – especially the most price-sensitive emerging buyers – and cause additional security concerns,” the IEA said in the report.
The report also addresses how LNG markets are affecting shipping needs, noting that the danger of a lack of timely investment in the LNG carrier fleet could risk market development and security of supply, which could in turn happen even earlier than the risk of insufficient liquefaction capacity.
To prevent or mitigate these issues, the IEA said supply flexibility is very important to ensure global gas trade development and security.
“Nevertheless, the fact is that the priorities in terms of flexibility are different for long-term traditional buyers who want to remove destination clauses, and new emerging buyers who focus on ensuring short-term supply, usually for immediate execution,” it said.