In this episode, I pick up on last month’s conversationabout irrational optimism around LNG projects reaching FID.

 I focus first on the US, which has seen five FIDs so farthis year —and another five could follow soon. Big projects are also being announced in Argentina, Canada, and possibly Mozambique, among other places.

I'm sceptical that the market can easily absorb such large volumes of new LNG; we’re already witnessing softer prices in major markets, partly because low oil prices are weakening LNG prices further.

China, once viewed as a limitless source of LNG demand, hasslowed its demand growth by boosting domestic gas production, expanding renewables, and increasing pipeline imports. Now, China mostly buys Russian LNGdirectly.

A major concern is that 90% of the new US LNG salescontracts go to portfolio players and traders—the so-called 'middlemen'—who have no intention to consume the LNG themselves. For example, Sempra’s Port Arthur Phase 2 is selling just 1.5 MTPA out of 13 MTPA to an actual end-user(JERA); the rest is contracted to parties who must resell it for more than they paid. Notably, 5 MTPA is sold back to Sempra, meaning 40% of the facility's output is bought by its own subsidiary. If the price gap between US LNG and global markets narrows, this setup could spell trouble.

 As I said in the last episode, this is a good time to be inthe permitting process in the US and elsewhere (such as Canada)… but may not be a good time to be committing to add yet more volumes into a saturated market.  Gulfstream LNG is taking this prudent approach.

To wrap up, I comment briefly on the recent Venture Global vBP arbitration settlement, and compare it to the Venture Global v Shell case from a few months back.

 Comments always welcome!

@onmymind @vivekchandra @gulfstreamlng