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LNG industry trends
Deloitte’s four-part series on LNG
LNG at the crossroads: Identifying key drivers and questions
For an industry that is just over 50 years old, liquefied natural gas has matured rapidly and is now part of an upheaval in the global energy market. The liquefied natural gas trade has quadrupled over the last two decades and is set to double over the next two.
Work in progress: How can business models adapt to evolving LNG markets?
LNG update—Part four
The liquefied natural gas (LNG) industry is in a state of flux even as it continues to grow, with a number of opportunities and threats facing the six principal business models that make up the market. Flexibility and nimbleness will be key for businesses to expand not just volumes, but also value. The fourth report in our LNG series explores how these business models may adapt to a complex industry environment—and how that environment could evolve:
- There will likely be a pronounced “move to the middle,” as buyers and sellers look to increase marketing capacity.
- Rising activity levels favor businesses that have developed extensive trading capabilities.
- New trading hubs could expand and deepen spot markets, enabling increases in physical and financial trading.
- Novel financing options and floating technologies could lead to more flexible contracts with shorter durations and creative pricing.
Download the report for a strategic framework and to discover the opportunities and risks for existing business models and how they will need to adapt to the new LNG landscape.
Building an industry: Can the United States sustainably export LNG at competitive prices?
LNG update—Part three
The US natural gas industry has dramatically changed over the last 10 years, with prices halving as production grew by almost 50 percent. The key driver to the current energy renaissance is the largely unpredicted success of unconventional gas extraction, most notably in the Marcellus and Utica shale plays in Appalachia.
For the United States to sustainably build a new LNG export industry, producers will need to grow production at historically low prices—not just by investing additional capital to complete more wells, but also by leveraging operational efficiencies and pursuing new technologies.
Our third report, Building an industry: Can the United States sustainably export LNG at competitive prices? drills into the US upstream sector to answer the following key questions facing the industry:
- How much gas needs to be produced for domestic consumption and how much will be exported via pipelines and LNG?
- What will be the competitive price for US natural gas after factoring in liquefaction and transport costs?
- Based on historical decline and production rates, how much new production will be needed?
- Going forward, how profitable will existing resource potential be at expected prices?
Five years on: The outlook and impact of American LNG exports
LNG update—Part two
Continued strong growth in US shale gas production has driven domestic prices down to a 15-year low and sparked a surge in LNG export investment interest. But just as US LNG cargoes enter the international markets, global demand growth has begun to wane—and now exporters face increased competition and excess liquefaction capacity.
Deloitte MarketPoint projects the glut could potentially last until the early 2020s. Will competition between LNG suppliers lead to lower global gas prices? What will be the impact of LNG exports on US production? And for buyers, is this an opportunity to renegotiate existing contracts? Explore the evolving LNG market in Deloitte’s second report in a four-part series.
This report also looks back at Deloitte MarketPoint’s 2011 and 2013 US LNG studies, Made in America: The economic impact of LNG exports from the United States and Exporting the American Renaissance: Global impacts of LNG exports from the United States.
Download the second report in our four-part series to revisit two past Deloitte MarketPoint papers and learn how the past drives the current global gas outlook.
LNG at the crossroads: Identifying key drivers and questions for an industry in flux
LNG update—Part one
Deloitte’s first report in a new, four-part series on liquefied natural gas (LNG), LNG at the crossroads: Identifying key drivers and questions for an industry in flux, details a strengths, weaknesses, opportunities, and threats (SWOT) analysis, as well as seven key factors that we expect to affect the LNG industry over the next decade.
With over 50 years of shipments, the LNG industry’s characteristics are well understood, but will not necessarily remain the same. Key changes in the business landscape will alter the equation, with the potential to further expand the market, and shift the underlying foundation. While a SWOT analysis is most often used to discuss the company-level position, it is equally applicable to industry segments like LNG relative to others, as discussed in the report.
What are seven factors influencing the LNG industry in the next decade?
Large, new volumes of LNG are entering the market from the United States and Australia, just as slower-than-expected economic growth impacts demand in Europe and Asia. As the industry navigates troubled waters, seven key factors will drive how LNG will grow in the next decade.
- Slower economic growth: LNG consumption is driven by growth in Europe and Asia. Continued malaise has weakened expected demand growth in these regions. Further weakening in regional growth, particularly in China, would flatten natural gas demand in key importing countries.
- Higher energy efficiency: Energy intensity of global growth has declined over the last few decades as high energy prices and environmental concerns have driven the adoption of higher efficiency technologies. New technologies and regulatory scrutiny could further this trend.
- Excess LNG supply: New capacity coming online in the United States and Australia is weighing down on an already saturated market. As few as one in twenty planned projects may be needed to meet demand through 2035, and only those with lower costs, direct access to markets, and signed buyers will move forward.
- Lower shipping costs: Shortening the trading distance with more flexible contracts can reduce the cost of shipping, driving an increase in volumes as incremental margins improve. This, combined with new lows in vessel day rates, will reduce the natural gas price differential required to drive investment.
- Access to new markets: Japan and South Korea import half of all LNG volumes, historically paying a premium over shipments in the Atlantic basin. Future growth in trade will require new LNG regasification facilities to be built in more countries to meet growing global fuel needs. Floating liquefaction and regasification will play a large role in widening the global market.
- Reaching new users: Utility-scale power generation drives much of the demand for natural gas. However, LNG as an alternative transport fuel for shipping, trains, or trucks, as well as a power source for remote small-scale grids, will provide a long tail of potential demand growth.
- Improving market liquidity: Floating liquefaction and regasification combined with new countries building both import and export capacity can transform the current contract-dependent market into one that provides trading opportunity through transparent gas benchmarks and a flexible spot market.
Learn more about the LNG industry
Read our first report in a four-part series, and stay tuned for more reports in our LNG industry series. What can you expect? Deloitte Market Point’s analysis of US impact on the global LNG market fundamentals, the geology and geography of North American natural gas exports, and the impact of a fully globalized and liquid LNG market.
View past LNG industry reports from the Deloitte Oil & Gas practice:
Meet the authors
Vice Chairman | US Energy & Resources Leader
John serves as the vice chairman, US Energy & Resources leader for Deloitte LLP. John works closely with our energy and resources clients to bring the deep capabilities of the firm to solve problems and enhance value...More
Executive Director | Center for Energy Solutions
As an executive director for the Deloitte Center for Energy Solutions, Deloitte Services LP, Andrew works closely with Deloitte’s Energy & Resources leadership to define, implement, and manage the execution of the Center strategy...More