Over Estimation

The last few toll roads built in Aust have gone into receivership due to financing based on over estimation of car usage on the roads.

Now we hear that the same is happening to Chinese demand for LNG..........................a  potential body blow to STO and ORG

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China’s Natural Gas Demand is Miscalculated By The Market
By: Hardy Banks Published: October 09, 2015 at 07:10 am EST

• SNP
• COP
• ORG

The decline in demand came after the persisting slowdown in the Chinese economy
China’s natural gas demand is overestimated by the energy industry. As a result, the global oil and gas companies are paying a heavy price for taking the risk.
Few years ago, when China’s economy started to decline, several major oil and gas companies gambled on the country’s demand for natural gas. Many Australian and Canadian companies spent billions of dollars on LNG projects to cater to the increasing Chinese demand. However, the results were different.
China was always seen as a wonder market that would continue to grow and likewise many companies thought that the demand for LNG would continue to grow. However, the recent data presents a gloomy picture. Chinese LNG imports were down by 3.5% year-over-year as of September compared to a 10% rise in the previous year. Moreover, the country’s total gas consumption grew only by 2% in the first half compared to a double digit growth in recent years.
The declining LNG demand has sparked an industry-wide miscalculation about Chinese natural gas demand. Due to this, Wood Mackenzie, an energy consultancy firm, lowered its China’s gas demand forecast by 15% by the end of 2020.
Overall, according to the Citi Research, by the end of 2018, the world will face LNG oversupply of around 25 million tons, which is more than what China imported overall in 2014. On the other hand, Citi believes that if all the uncompleted projects are completed and proposed today, the world will face around one-third more volume of gas than it requires by the end of 2025.
Gavin Thomson, working as an analyst at Wood Mackenzie, told WSJ that that China can’t absorb all the gas thrown at it and currently, the country is slightly pungent on the gas.
According to Platts, LNG prices have declined as a result of weak Chinese demand and oversupply of natural gas. The Northeast Asia spot LNG prices have declined to $8 per million metric British thermal units (mmBtu) from $14 last year.
Major Chinese oil and gas companies have also been hit hard by decline in Chinese demand. Sinopec Corp. (NYSE:SNP) recently invested in a LNG project in Australia called Australia Pacific along with ConocoPhillips (NYSE:COP) and Origin Energy (ASX:ORG). As per the agreement, Sinopec will receive around 7.6 million tonnes per annum. But due to declining Chinese demand, the company will be forced to sell half of its gas on the spot, which will possibly create loses for the company.
Moreover, natural gas is a great example of how Chinese economic slowdown has negatively affected the global commodity market. All the assumptions made by the producers of raw materials on Chinese demand have been proved wrong by the declining Chinese economy.
The energy sector has been hit hard by the drop in LNG demand followed by a breakdown in crude oil prices. Natural gas has been termed as fuel for the future, but the road to the future seems to be far from smooth as the emerging market has been hit hard by a weak Chinese demand