From the AFR comes some price rhetoric on LNG by Woodside Petroleum chief executive Peter Coleman:
“By holding out for a cheaper price, customers are potentially exacerbating project FID [final investment decision] delays and may unwittingly help bring on a supply crunch,” he said on Thursday.
Mr Coleman is one of several chiefs of LNG supply companies that have called for an end to the current stand-off between buyers and sellers that has plagued the market this year, preventing a consensus on pricing that would allow costly production projects to proceed.
Mr Coleman pointed to the drop in returns on capital invested that is putting pressure on the oil and gas industry and threatening investment in new projects. He said returns over the past four years had averaged 1.1 per cent lower than the weighted average cost of capital, with the result that $400 billion in value had been stripped from the industry.
What stand-off? The US is signing up customers hand-over-fist! Then there are the growing pipeline supplies from Russia into the Far East.
As well, the lousy returns on equity are not because of low prices but because it takes 5 years to make a return after the recent investment binge. Prices have been sky high throughout.
There is no shortage coming in 2020, either. I haven’t updated the following chart for 12 months but it’s still roughly accurate, there’s plenty of LNG coming on-stream in the Pacific basin with the US going gang-busters:
Man-up, Woodside! Cost-out and competition are here to stay.
