Momentum moving against oil linked pricing for gas contracts

While Australian domestic gas contracts are increasingly being linked to oil, the global momentum is in the opposite direction. The US Department of Energy continues to approve LNG projects for export to non-FTA countries. By our count there are now 53 Mtpa of approvals in place, more than the industry generally expected. Companies were talking about 30-40 Mtpa of US exports. Now they are talking about 40-60 Mtpa, just following the approvals up. This exclude exports to LNG buyers with FTA’s, Korea and Singapore. The indications are that we will see further approvals of exports linked to US gas prices, rather than oil. Meanwhile in Europe, Statoil, Europe’s second largest gas supplier, has now broken the link to oil prices in a majority of its northern European contracts, indexing contracts to prices at regional gas hubs. Most current LNG producers expect oil-linked pricing to stay but the movement against it is clearly gathering momentum.