Falling oil prices are prompting producers to retract plans for new plants and postpone investments. This move may cause a shrink in the global output of liquefied natural gas after 2020. LNG projects linked to the price of oil will be under pressure as oil prices fluctuate between $50 and $60 a barrel, with more than $60 billion of cash flow affected this year. It is anticipated that more than $100 billion of investment are at risk of suspensions or cancellations.
Last year benchmark crude sank almost 50 percent as U.S. pumped oil at an astonishing rate, the fastest in more than three decades. This has resulted in companies such as Royal Dutch Shell Plc, BG Group Plc, Petroliam Nasional Bhd and Chevron Corp. to cut costs or delay spending on LNG projects across the world. The marginal tightening of the market will see some of the projects stopped in its entirety while some will be delayed for three to five years.
New projects need to be approved between now and 2020 to meet long-term demand. At the current oil prices, many LNG-based projects would have never started. Some say, that low oil prices is a good omen for LNG business as it drives out unsuccessful projects.