Full Title: Global Gas Security Review. How Flexible are LNG Markets in Practice?
Author(s): International Energy Agency
Publication Date: November 1, 2016
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Low natural gas prices, along with expectations for continued well-supplied liquefied natural gas (LNG) markets over the medium term, are giving some a sense of comfort over markets’ ability to adjust to potential demand or supply shocks without placing national and regional gas systems under unacceptable stress.
There is no doubt that today’s market conditions are helpful for global gas security. A massive expansion of LNG export capacity is coming at a time of weaker-than-expected global gas demand. The temporary excess of supplies resulting from this situation is providing a buffer that would mitigate the impact of possible supply disruptions.
Yet, the supply security architecture of an energy system should not be based on cyclical factors. Today’s oversupply should not be regarded as a structural feature of the market and thus as an expression of the higher level of security that LNG markets can bring. On the contrary, it stems from a step change in the pace of global gas demand expansion that caught industry by surprise, and as such it highlights the challenges of accurately forecasting demand (and supply) in a rapidly evolving energy system. What is clear is that market conditions change, often unexpectedly, and the global gas security structure should be – as much as possible – resilient to sudden shifts.
This report focuses on two essential elements of a global gas security assessment: how much redundancy is embedded in LNG infrastructure – particularly the liquefaction portion – and how flexible LNG supplies are in practice