"Permanent supply shiftConsultancy Wood Mackenzie estimates that...

"Permanent supply shift

Consultancy Wood Mackenzie estimates that global LNG supply will need to increase 25 per cent by 2030 to meet demand levels. And that’s even with that new production coming on in the next two years.

Developing nations in Asia will be the key driver of that demand. But as Russell Hardy, chief executive of the world’s largest independent energy trader, Vitol, told a conference in Malaysia recently, Europe’s new hunger for LNG after the Ukraine invasion means supply has permanently shifted away from Asia to Europe.

But increasing global LNG supply by 25 per cent by 2030 will not be easy. Wood Mackenzie estimates that the costs to develop a new project are two-thirds higher than before the pandemic, while justifiable scrutiny on the carbon intensity of new projects is likely to be a further hurdle to bringing on new supply.

This sort of supply/demand mismatch is usually a recipe for higher prices over the long haul. That’s what Buffett appears to be betting on, by taking control of one of the few export LNG projects in the US. And it’s why the Australian government is determined to act to try and keep a lid on prices – even if its intervention appears likely to hamstring the new supply the world requires.

Buffett’s LNG bet would also be a fillip to the likes of Woodside and Santos as they pursue new LNG developments. It’s never a bad thing to be on the same side of a trade as the world’s most famous investor."