Goldman Sachs(US:GS)2025-11-17 02:42Summary of Key Points from the Conference Call Industry Overview - The focus is on the global Liquefied Natural Gas (LNG) market, particularly the potential oversupply expected later this decade due to significant increases in global LNG export capacity [1][2][4]. Core Insights and Arguments - Global LNG Oversupply: There is a consensus that the global LNG market will face a significant oversupply later this decade, driven by the largest wave of global LNG export capacity additions [2][4]. - China's Role: China, as the largest LNG buyer with a projected 19% market share in 2024, is considered a potential sink for this oversupply. However, it is believed that China will not absorb the excess supply to the extent needed [2][3][4]. - Demand Projections: Under a low-gas-price scenario of $5/mmBtu for 2028-2030, China's natural gas demand could be 6% or 29 billion cubic meters per year (Bcm/y) higher than current forecasts over the next five years. Despite this increase, a sizable oversupply is still expected [1][3][4]. - Infrastructure and Strategy: Existing infrastructure could support a larger increase in demand, but China's current energy strategy prioritizes domestic energy security, which may limit the extent of gas demand growth [1][3][4]. - US LNG Export Cancellations: The likely solution to the anticipated global LNG oversupply is expected to be US LNG export cancellations, particularly as international prices fall below the $5/mmBtu threshold [1][4][73]. Additional Important Insights - Impact of Decarbonization Policies: China's decarbonization efforts post-2030 could lead to a modest increase in the gas share of power generation and industrial energy consumption, potentially adding 57 Bcm/y of gas demand by 2035 [63][65]. - Gas Demand Growth Multipliers: The current GDP growth multiplier for gas demand is estimated at 0.6, significantly lower than the historical average of 1.5, indicating weaker than expected gas demand growth [18][21]. - Renewable Energy Growth: The rapid increase in solar and wind generation capacity in China is expected to continue limiting gas demand growth for power generation [19][20][24]. - Potential for Fuel Switching: There is potential for coal-to-gas (C2G) switching if LNG prices fall below coal prices, but historical data suggests that significant switching has not occurred even when prices favored gas [48][54][60]. Conclusion - The analysis indicates that while China could play a role in absorbing some of the global LNG oversupply, various factors including domestic energy security, renewable energy growth, and historical demand patterns suggest that the extent of this absorption will be limited. The US LNG export market is likely to adjust through cancellations to balance the oversupply expected in the coming years [1][4][73].