It is the best time we have but, unfortunately, it is not a great time to be marketing LNG. Currently, the global LNG market is in surplus because of all the supply projects recently brought on line or currently under construction.
Fortunately, natural gas is in increasing demand worldwide, with Asia-Pacific nations leading the demand pull. It is safe to say by industry consensus that a supply/demand equilibrium will be reached in the early 2020’s with more LNG needed by the 2022-25 timeframe.
There are many more supply projects that also desire to come on line to meet that demand. These new projects are all in various stages of development, like the Alaska LNG project, and therefore will be our primary competition.
The global competitive arena will be intense, with major competitors using new and improved tools at their disposal to compete. Customers will be demanding contract terms reflective of a buyer’s market. Once the competition is over, and the dust settles, the LNG industry will most likely have existing LNG suppliers that have become stronger, nations that have entered the LNG export scene for the first time, states in the US that are engaged in LNG exports, and contract terms and conditions that favor buyers as well as work against new entrants.
Even though the market is not great for a new supply project, it is as good as it will get. Alaska must leverage its advantages to compete now for the future demand. An LNG purchase contract is a multi-billion dollar purchase commitment that would take an appreciable amount of time to negotiate and approve. AGDC’s plan is to begin customer awareness and marketing now, with the intention of securing commitments in 2017/18 that would be necessary to underpin the financing needed to construct the project and reach the 2022-25 window of opportunity.
Although some people may question whether a market window will exist in the mid 2020’s, if Alaska is not positioned to compete now, we will certainly miss the opportunity.