The world’s biggest liquefied natural gas (LNG) trader, Royal Dutch Shell, says buyers of the fuel have not taken advantage of a market that favours them and have failed to extract better supply deals. Steve Hill, executive vice president at Shell Energy, said this failure was damaging to all market participants as it prevented new supply from being developed.
“It’s quite interesting in that you could argue that buyers haven’t necessarily taken advantage of the buyer’s market because buyers haven’t done very many long-term deals,” he told an industry seminar in Tokyo.
“I think what is our concern is that if deals aren’t done and projects aren’t sanctioned, eventually it won’t be a buyers’ market anymore because demand will grow and supply won’t.
Hill said that a traditional model of switching back and forth between the buyer’s market and the seller’s market would not be helpful either way because that would lead to demand destruction in addition to projects not being developed on a regular schedule.
“So what would be better would be a continued growth in the market. Meeting the needs of the buyers, which is clearly crucial, and enabling the growth of new projects at the same time is this challenge we’re facing today,” he said.
Hill also said that LNG has a particularly important role in China because of its growing gas demand and the increasing seasonality in its gas demand because it has very little storage.
“China will need more domestic gas and it will need more pipeline imports and it will need more LNG,” he said. “I don’t see any conflict between the three.”