Woodside Petroleum Ltd| Operating and Financial Review 25
1. Supply forecast based on existing capacity and under construction developments.
2. LNG demand growth to 2035 is widespread across Asia. Japan is the only regional market to contract. Source: Wood Mackenzie.
Rebalancing of the global LNG market is expected in the early 2020s, with global LNG demand forecast
to exceed supply. Woodside's strategy is focused on delivering new LNG supply to energy markets in the
required time frame.
The LNG market is growing rapidly, underpinned by the
role of natural gas as a clean, reliable and aordable energy
source. The expectations of some market commentators of
a large oversupply have not materialised. LNG demand has
increased by over 21% in the past two years. Continued LNG
demand strength, supported by higher energy demand and
an increased focus on air quality, is signalling the start of a
new cycle of LNG project sanctions.
A signiﬁcant driver of recent LNG demand growth has
been Asian countries’ increased focus on air quality. Gas is the
cleanest burning hydrocarbon and has received strong policy
support from countries seeking to replace coal-ﬁred power
generation. China has led with large-scale replacement of coal
with natural gas.
South Korea has also developed energy policies signalling
a shift away from coal-ﬁred and nuclear power generation
towards cleaner-burning gas. India’s energy demand growth
has been fuelled in large part by coal and accompanied by a
deterioration in air quality. To address this, India has released
new energy targets including increasing the share of gas in the
energy mix from 6% in 2018 to 15% by 2022 and prioritising
infrastructure development such as LNG receiving terminals
and gas network pipelines.
Beyond use in power generation, gas is forming part of a policy
push for cleaner sources of fuel in transport and industry. In
China, industrial use already represents over 30% of total gas
demand and is expected to grow at over 4% p.a. to 2030 as
gas replaces other fuels. China has introduced incentives for
compressed natural gas (CNG) in light-duty vehicles and LNG
in trucks. Today there are around 300,000 natural gas fuelled
trucks on Chinese roads.
New supply regions such as the USA and Russia are
contributing to the growth of the global LNG market. In 2019
Australia is set to become the world’s largest supplier of LNG.
The growth of the LNG market has involved more diverse
buyers and sellers and with them, evolving commercial and
contracting structures. The traditional long-term contract
remains prevalent, but more innovative contracting structures
with variety in pricing mechanisms, contract length and
ﬂexibility are becoming increasingly common. Both buyers and
sellers are seeking a combination of long-term, mid-term and
short-term contracts within their portfolios.
New LNG investment decisions are required in the coming
18 months to ensure the market remains adequately supplied
with LNG from the early 2020s. Projects supported by equity
with strong balance sheets will be best positioned to
participate. With their close proximity to Asian LNG demand
centres, our growth projects are ideally positioned to meet
growing LNG demand.
Source: Wood Mackenzie ‘Global Gas Markets Long-term outlook 2018: LNG Supply’ and
Wood Mackenzie Q4 2018.
Japan, Korea and Taiwan2
Global LNG supply1
LNG Demand Outlook
2035 forecast Asian
above 2018 levels