Asian LNG buyers are dealing with a finely balanced market in the near term, where any supply disruptions or increases in demand could lead to significant price volatility, according to Mangesh Dilip Patankar, Vice President of APAC Gas and LNG Consulting at Wood Mackenzie. Speaking at the Gastech 2023 conference in Singapore, Patankar stated that the LNG market is at a critical juncture, with pricing and contract terms being significantly affected by an uncertain outlook, leading to disparities in buyer and seller expectations.

Many LNG buyers are challenged with securing LNG supply security while maintaining competitive procurement costs and flexible contract terms, Patankar commented. Simultaneously, the terms in LNG sale and purchase agreements (SPAs) are evolving as LNG trading increases.

According to Wood Mackenzie Lens, Australia and Qatar are expected to be the largest LNG suppliers to Asia from 2023 to 2030, with volumes of over 886 million tons and 827 million tons, respectively. This will account for nearly 60% of the total LNG volumes delivered to Asia during this period.

Patankar believes that the cooling of the LNG market from last year's highs has prompted emerging buyers, particularly in Asia, to re-engage with sellers. However, he cautioned that Asian buyers seeking to re-enter the market must understand the complex fundamentals of LNG and track its price volatility.

"As [LNG] buyers contemplate their options, it becomes crucial for them to evaluate the mix of pricing indices in their portfolio, such as oil or Henry Hub, and whether they should also take some exposure to spot pricing/spot purchases," Patankar said.

He added that with the new wave of LNG projects not expected to significantly increase supply until 2026, the market is likely to remain tight. Wood Mackenzie LENS data indicates that LNG year-on-year supply growth will average 40 million tons per year from 2026 to 2028, helping the global market rebalance and bring prices down.

Patankar believes this will improve gas affordability, increase LNG availability for Europe, and support a rebound in demand in Asia. The long-term outlook for the LNG market beyond 2028 depends on factors such as the number of liquefaction project final investment decisions (FIDs) in the next 1-2 years and the pace of the energy transition, among other supply-demand-related factors.