By Florence Tan
SINGAPORE (Reuters) - French gas and power company Engie (PA:ENGIE) expects to weather festering oversupply in markets for liquefied natural gas (LNG) with long-term deals kicking off in the next couple of years, a senior company official said.
Production of the superchilled gas has been outpacing demand as new supplies come online in Australia and the United States, driving down Asian spot prices by more than 70 percent since 2014.
"In the short-term, the market is still oversupplied," Engie Executive Vice President Didier Holleaux told Reuters.
"Fortunately only a fraction of LNG globally is sold in the short-term market, a significant part of it is still on long-term contracts ... We have new long-term contracts coming onstream in Asia next year and also the year after."
Engie a few years ago locked in 20-year deals to supply Japanese utility Tohoku Electric Power (T:9506) and Taiwanese state firm CPC Corp from its U.S. Cameron LNG project that will start production in 2018.
The project will add 4 million tonnes per year of U.S. LNG to Engie's global portfolio of 16.4 million tpy.
"It's a significant diversification for us because for the first time we'll have LNG coming from the U.S.," Holleaux said late last week.
Meanwhile, Engie, previously known as GDF Suez, is in talks to supply gas to Thailand and Myanmar and to build floating storage regasification units (FSRUs) that will supply smaller volumes of gas to power plants on Indonesian islands.
"Most of the new (regasification) capacity will be in Southeast Asia," Holleaux said, adding that Indonesia could soon become a net LNG importer as "their needs are increasing and they have not had such big discoveries recently".
Engie in June supplied its first LNG cargo to Indonesia's Pertamina from the local Jangkrik field, its joint venture with Italy's Eni (MI:ENI).
In China, after inking an LNG supply agreement with Beijing Gas, Engie is looking at opportunities in the underground gas storage needed to hold stocks to meet seasonal demand, Holleaux said.
"Chinese players have now reached a technical level where they don't necessarily need us," Holleaux said.
"It's different in underground storage where we have specific skills and know-how and we may still help them."
China, the world's largest energy consumer, plans to generate more electricity from gas instead of coal as it fights pollution.
"For a very long time, Asia, mainly Japan and Korea, has been one of the most important markets, one of the most reliable ones, in many years the best priced market. But times are changing and we will adjust," Holleaux said.