1. Economic Commentary
QNB Economics
economics@qnb.com.qa
June 22
Robust Global Demand to Keep LNG Prices High
Robust global demand is likely to keep LNG
prices high over the next few years. Demand is
growing both as a result of strong Asian
economic growth and the switch to cleaner
energy, particularly in China. This trend is
likely to continue, notwithstanding the so-
called US shale gas revolution and the coming
into operations of the USD400bn Russia-China
gas pipeline signed on May 21 . Overall,
the future of the LNG market remains bright
and is likely to result in high LNG prices for
years to come. This will continue to support
Qatar’s large current account surpluses.
Gas and Oil Prices
Sources: Bloomberg and QNB Group analysis
The LNG market continued to tighten in 2013.
Global LNG deliveries were an estimated 240m
tons—broadly flat compared with Qatar
continued to be the largest LNG exporter, with
about one third of global supply. At the same
time, demand from Asia and Latin America
rose, with China, South Korea and Mexico
registering the largest increase in LNG
demand. In particular, China brought three
new re-gasification terminals online as its
switch from coal to LNG as a cleaner fuel for
electricity production continued. This
tightening of the market resulted in an
average USD1 increase in LNG prices per
million British thermal units (mBtu), despite
Brent crude oil prices falling USD4.5 per barrel
and lower LNG demand from Europe.
The outlook for the LNG market is likely to
continue along similar trends in 2014. On the
supply side, three new LNG trains in Algeria,
Australia and Papua New Guinea are expected
to come on-stream in 2014. This is likely to add
about 10m tons to global LNG production—a
increase. On the demand side, continued
growth in Asian demand and the need for
Europe to diversify away from Russian
pipeline gas may outpace the increased supply,
leading to a small increase in LNG prices of
about USD0.5 per mBtu despite the expected
decline in Brent crude oil prices. The ongoing
violence in Iraq and Syria could, however,
result in higher-than-expected LNG and crude
oil prices in the second half of 2014.
Over the medium term, global LNG exports are
unlikely to meet the growing global demand,
leading to higher LNG prices. On the supply
side, the gradual ramp up in production in
Australia (60m tons over the next six years)
and Papua New Guinea (7m later this decade)
is likely to result in global LNG exports
reaching 300m tons by 2020—a 3.8%
compound annual growth rate. Additional
exports are unlikely to materialize before then.
In particular, the so-called shale-gas
revolution in the United States is not expected
to materialize in additional LNG exports before
2020 as this would imply a convergence of US
0
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20
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2008 2009 2010 2011 2012 2013
Brent Crude Oil Price (USD per barrel, LHS)
Japan LNG Import Prices (USD per mBtu, RHS)
Henry Hub (USD per mBtu, RHS)

2. Economic Commentary
QNB Economics
economics@qnb.com.qa
June 22
domestic gas prices (Henry Hub) to
international LNG prices, something current
and future US administrations are likely to
resist (see our Economic Commentary dated
November 28, 2013). Moreover, the recently-
signed agreement for Russia to provide 38bn
cubic feet a year of pipeline gas over the next
30 years to China is likely to imply a
displacement of gas supplies from Europe to
Asia, thus pushing up prices in Europe while
reducing prices in Asia. While this is likely to
bring about convergence in global LNG prices,
it will not change the aggregate global gas
supply.
On the demand side, two factors are likely to
make global demand continue to outpace
global supply. First, energy demand in Asia is
expected to remain robust, even after taking
into account a slowdown in Chinese growth.
Countries like China, India, Indonesia,
Malaysia, Pakistan and Thailand have just
started to rely on LNG supplies for their energy
needs and this trend is likely to grow over the
next few years Second China’s rising
pollution will mandate a switch away from
coal to cleaner energy sources, particularly
LNG and pipeline gas. These two factors are
expected to lead to global LNG demand
growing steadily by 5-7% a year up to 2020,
thus outpacing global supply.
Overall, robust LNG demand is likely to
outpace global supply up to 2020. This is likely
to imply higher LNG prices as demand from
Asia remains robust. As the largest exporter in
the world, Qatar is likely to benefit from higher
LNG prices, resulting in large current account
surpluses for years to come.
Contacts
Joannes Mongardini
Head of Economics
Tel. (+974) 4453-
Rory Fyfe
Senior Economist
Tel. (+974) 4453-
Ehsan Khoman
Economist
Tel. (+974) 4453-
Hamda Al-Thani
Economist
Tel. (+974) 4453-
Ziad Daoud
Economist
Tel. (+974) 4453-
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