Temporary glut as global gas supplies grow and countries move towards lower emissions fuels says WoodMac

Global supply of liquefied natural gas (LNG) is rapidly growing, putting pressure on local producers.

Head of Asia Pacific Gas and LNG research at consultants Wood Mackenzie, Kerrie-Anne Shanks, said there was a flip side in that it was improving liquidity and security.

There are another 18 major gas projects yet to start producing, including four in Australia: Prelude, the floating LNG facility off the far north-west coast of Western Australia; Wheatstone, also off the WA coast, near Onslow; Icthys in Darwin in the Northern Territory; and a third train for the Gorgon Project on Barrow Island off the WA coast, near Exmouth.

Ms Shanks said it will be a difficult few years for high cost new producers, but the move towards lower emissions energy, especially in China, India and South East Asia, means the global market will be able to absorb much of that within a few years.

"We expect there to be around 260 million tonnes of LNG produced globally in 2016," she said.

"But since 2014, 60 million tonnes of new capacity has started operation, and a further 110 million tonnes of capacity is under construction."

The price of Australian LNG is pegged to the price of oil, which has been languishing for the past few years.

A number of Australian companies and joint-ventures that had spent billions on new facilities in Queensland were hit hard.

There were multi-million-dollar impairments and value write-downs, and share prices plummeted, in some cases by well more than 50 per cent.

But the rise in the price of oil, brought about by OPEC nations agreeing to cut production, has pushed up the export price for LNG.

"The LNG price has recovered to around $US9 to $US10," Ms Shanks said.

Export gas is measured per Million British Thermal Units (Mbtu) and often represented as a gigajoule in the Australian domestic gas market.

"We've had China importing record amounts of LNG and we've seen a lot of new markets emerge such as India and across South East Asia," Ms Shanks said.

"And normally when countries import gas they continue to do so and they've already developed the necessary gas infrastructure and continue to use it.

"We actually think the role of gas in the global fuel mix has constantly been increasing as countries look to more environmentally friendly fuels."