Will 'S'-curves be used to reduce seller downside risks in a low oil price world?

摘要

The almost 60% collapse in the oil price since mid-June has called into question the viability of some of the high cost LNG projects now being planned as oil and gas companies look at ways of reducing capital expenditure. The projects at most risk are those targeting Asian markets where LNG prices under long-term contract are generally still indexed to crude oil. Although it is prices after the projects' start-up in four or more years' time that will determine the economic viability of the investment, prices today have a strong influence on forecasts of future trends. With 128 mtpa of new capacity under construction and due to start-up over the next five years, with much of the output contracted to Asia, there is no immediate need for many buyers in the region to commit to further new supplies but they know that if they delay for too long there is a risk of shortages in the longer term and a return to the high prices of the last few years. So how can buyers and sellers keep projects on track to a final investment decision despite today's low oil prices? Gas Strategies considers whether "S"-curves, which have been used in the past when prices were low, could be a way of ensuring that the new projects needed to meet forecast demand growth after 2020 are built.