Sell side catches down to MB on LNG

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From the AFR, chalk up another win for MB versus the sell side:

Citi expects that the timing of Woodside Petroleum’s Browse floating LNG project in Western Australia will have to be put back…Gas demand in China has fallen well short of forecasts, leaving Asian LNG markets facing oversupply for several years as a wave of new plants begin production in Australia.

…It is now assuming long-term LNG sales contracts will be priced at 13.5 per cent of crude oil prices, rather than the typical 14 per cent. Prices for spot and short-term sales may be priced at just 10 per cent of crude oil prices for the years from 2016 until 2020 when the oversupply is at its worst, rather than 12 per cent, it said.

“We think contractually Sinopec has no option to renegotiate, APLNG is protected by the contract, and Sinopec will need to instead trade excess LNG on to others, potentially at a loss,” Citigroup said.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.