On Wednesday, ahead of Woodside's annual investor day, Coleman was noticeably optimistic. He had just checked the LNG price and it was sitting at $US9.15 per million British Thermal Units (MMBtu), up 83 per cent from a year earlier and more than double the $US4 a MMBtu prevailing in May 2016. Increase in demand
The rise in LNG prices is due to an across the board increase in demand, primarily driven by China, which unchoked the bottle neck in LNG distribution caused by China's pipeline distribution system with the deployment of 250,000 LNG tankers.
This extremely clever response, which led to an exponential growth in LNG demand in China, was directly attributable to President Xi Jinping's demand that industry meet pollution reduction targets not achieved in the previous five-year plan.
Coleman says the demand for LNG is spreading to other countries in Asia, most notably Indonesia, which has switched from being an exporter to an importer of gas, and, Thailand, which is facing declining domestic production in the Gulf of Thailand. New users of LNG will be Vietnam and the Philippines.
Investors and analysts attending the Woodside investor day were handed a slide deck full of bullish forecasts including a forecast LNG demand will grow by 4 per cent compound to 2035 thanks to rising Asian demand and a widening gap between supply and demand because of a dearth of new projects.
Coleman says the Japanese success in breaking down the 30-year convention of cargo specific project related contracts has had a profound impact upon LNG availability.
"What's that done is put a whole bunch of new customers into the market," Coleman says. "We always said be careful what you ask for here."
The LNG market has changed dramatically since Coleman took over as CEO of Woodside in May 2011. Since then there are twice as many LNG suppliers in Australia and the United States has started producing LNG.
This has been good for companies like Woodside because it has given buyers the confidence to be in markets which previously were locked up with long term contracts. Coleman is looking forward to winter in China and Korea this year because it is likely to drive up the LNG price. Demand exceeding supply
Coleman says the crossover point for LNG demand exceeding supply has come forward by about four years because of lack of final investment decisions on new projects. Previously the market consensus had expected the inflexion point for supply and demand to be around 2025.
But Woodside, which always thought the cross over was earlier rather than later, now expects it to occur in 2021.
"That means the way you do business in the market is fundamentally different," he says.
"Today there is still fresh supply coming in, you will see that out of Wheatstone train two, out of Ichthys, out of Prelude and out of Cameron and Freeport plants in the US. That fresh supply is coming in but that will wash out by late 2020 and there will no new fresh supply coming into the market." Coleman says the conditions in the LNG market are as good as he has seen since the disruption in the marketplace following the Fukushima nuclear disaster in Japan.
"That was a disruption but in my view it was never going to be sustained," he says.
"Today this is more grounded on fundamentals – an oil price that seems to have found a new floor and supply and demand fundamentals
