LNG needs ‘right price balance for sustainability in European markets’

LNG exports are expected to rise in the years leading to 2030 as an increasing number of countries are turning to the fuel to cover their energy needs, diversify supply sources, and achieve climate change targets.

Most analysts foresee strong demand for LNG and abundant supply in the near future, which will theoretically enable new LNG production to be commercially feasible. If this is to be achieved, however, the price of LNG will need to allow for liquefaction and transportation costs but not be too high to the point of making this fuel uncompetitive. Striking the right balance is the main challenge, as was recently pointed out in an analysis published by the Oxford Institute for Energy Studies.

This right balance will most likely be achieved through a reduction in production costs rather than a sustained abundancy of supply and low prices, the study noted.

New LNG production projects need to achieve sale prices of between 6 to 8 dollars per mmbtu (one million British Thermal Units) to be profitable, a price level that instantly excludes many countries as potential buyers, as it would be unaffordable for them.

In its study, the Oxford institute concludes the price of LNG should ideally be at around 7 dollars per mmbtu in 2025 if imported LNG is to have a sustainable place in the European market.