ConocoPhillips is expected to take a final investment decision on whether it should develop the Barossa gas field.

On Tuesday, the Chief Executive of ConocoPhillips stated, he expects global prices of liquefied natural gas (LNG) to be weak in the coming months; they are however likely to improve once growing demand soaks up the excess supply in the market.

“LNG prices are pretty weak right now, but we believe it’s a short term phenomenon,” said ConocoPhillips Chief Executive Ryan Lance said at an industry conference in Australia. “We just came out of a mild northern hemisphere winter. We believe that demand growth will absorb the current supply excess that exists in the market today”.

ConocoPhillips operates a 3.7 million tonnes a year Darwin LNG plant in northern Australia as well as a 9 million tonnes a year LNG plant in the eastern coast of Australia Pacific.

Later this year, ConocoPhillips is expected to make a final investment decision with its partners on whether it should develop the Barossa gas field to keep the Darwin LNG plant filled when supply runs out around 2022 from its current source, the Bayu Undan field in the Timor Sea.

Barossa, about 300 km (186 miles) north of Darwin, is co-owned by ConocoPhillips, South Korea’s SK E&S Co and Santos.

LNG buyers are taking advantage of the currently weak LNG prices, which are now at their three-year lows below $5 per million British thermal units (BTU), by demanding short term contract agreements and more pricing latitude from suppliers.

“It’s a buyer’s market today,” said Lance. “As for the long term, we expect the current oversupply to tighten by the mid-2020s”.

“By then, new gas fields filling existing plants will have come onstream and new plants will be needed. Producers will need to line up longer term contracts from buyers to be able to fund those construction projects.”

“Longer term contracts between then will satisfy two needs: security of supply for the end users and security of demand for suppliers to underwrite their financial decisions,” said Lance.

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Tags: Australia Pacific, Barossa gas field, Bayu Undan field, ConocoPhillips, Darwin LNG plant, develop, excess supply, global prices, glut, liquefied natural gas, LNG, northern Australia, oversupply, prices, pricing latitude, Ryan Lance, Santos, short term contract, SK E&S Co, South Korea, suppliers, Timor Sea