Global LNG markets will significantly tighten over the next three years as a result of Japan's Tokyo Electric Power Company shutting the Fukushima nuclear plant after the March 11 earthquake and tsunami, Bernstein Research analysts said in a report Friday.
The long-term impact of the Fukushima shutdown and the resulting slowing of growth of nuclear power will increase global LNG demand by 25 million mt/year to 401 million mt/year by 2020, up from previous estimates of 378 million mt/year, the report said.
The hike in LNG demand reflects a reduction of 40 GW in global nuclear capacity as a result of early decommissioning, project suspension and slower capacity build as approvals are delayed.
"Given expected global demand growth, limited build-out in new capacity over the next 3 years and decline in net exports from SE Asia, global LNG spare capacity will drop to extremely low levels by 2014," the analysts said.
They added that LNG consumption growth would continue to be strong as the impact of higher Japanese demand would be felt from from the shutdown of nuclear plants at Fukushima and Hamaoka over this weekend.
"The next wave of Australian LNG projects will bring LNG markets back into oversupply but not until 2016," the report said, adding that this spike in oversupply would be short-lived and more LNG projects would need to be developed to fulfill demand needs.
Tighter LNG markets would also give support to gas prices in Europe, China and India.
The analysts said that producers such as BG with their large spot LNG portfolio, and emerging gas producers such as such India's Reliance, PetroChina, and Russia's Gazprom would be well positioned for growth given the upward pressure on gas prices.
They also added that unconventional gas would not have a significant impact on supply in global markets in the next five years.
