OIES – The aftermath of warmer than normal 2013/2014 winters in Europe and Asia, evidence of slowing Asian LNG demand growth through 2014 and the collapse of the oil price in late 2014 has resulted in a painful ‘new normal’ for key players in the global gas system, specifically LNG project investors and Russia/Gazprom. Although this paper has used a similar approach to previous work by the author relating to global LNG interactions, the context in mid 2015 has changed markedly and while the gas industry has in the past experienced and weathered periods of low prices, this time ‘it really does feel different’. At one level we can rationalise the slowdown in Asian LNG demand and stagnant European gas demand as having a direct causal impact on European hub and LNG spot prices. The oil price fall has in parallel brought oil – indexed gas and LNG contract price levels down to levels unimaginable just two years ago. With project economics challenged and cashflows crimped, investors in new gas supply projects, especially LNG, will inevitably hold back, cut costs and await a more positive market outlook.At a more fundamental level however, what we may be about to witness is a significant disruption to regional gas equilibria as a wave of new (Australian) LNG supply meets a slowing Asian market and a significant regional component (US/North America) re-connects with the global system in the form of 77 bcma (and counting) of new LNG export projects. Europe will be a passive recipient of excess supply at a time when its gas demand growth is at best tepid, but its import requirement may be rising due to declining domestic production.

This paper has addressed the following questions: