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The future of LNG
How LNG technology is reshaping the way we work
The liquefied natural gas (LNG) market is changing with the introduction of new technology and the advent of new demand sources. How will evolving business models and new technologies shape the LNG market of tomorrow?
LNG business models are changing due to increased resource availability, technological advancements, and new sources of demand. While long-term, oil-indexed contracts still make up the bulk of current trade gas-on-gas pricing, spot cargoes, and price transparency are increasing, creating opportunities across the value chain. These changing dynamics have increased market access for small-scale buyers and sellers, and opened new markets for natural gas traders, portfolio companies, and tolling liquefiers.
Based on a survey of LNG market executives from around the world and across the industry, this report expands on our prior analysis on the liquefied natural gas industry, Work in progress: How can business models adapt to evolving LNG markets. It includes an overview of the shifting LNG landscape, the evolving supply and demand conditions and other key trends, as well as the impact of new LNG technologies.
Betting big: LNG trends in Canada
By Andrew Botterill, Oil, Gas & Chemicals Leader, Deloitte Canada
Is Canada the next big bet for LNG? The sector is clearly on an upswing in Canada, especially, with the recently announced massive LNG project. Learn about the breadth of possibilities for the Canadian LNG market that is rapidly reconfiguring itself in the face of new realities.
What’s next for LNG?
Population growth, increasing economic prosperity in developing nations, government regulation and actions focused on improving air quality will drive demand for lower-carbon energy globally including natural gas. As a result, LNG will command an increasing share of the global fuel mix given its lower-carbon footprint and its ability to flexibly supply increasingly diverse markets, customers, and applications - ranging from power generation to marine and land transportation. Based on our survey, respondents expect consumption to increase in the Asia Pacific region over the next five years, most notably in China, India, and Pakistan, with the bulk of new supply coming from the US among others.
However, the market could become increasingly fragmented and new project sanctions could be deferred. Why is that? Historically, many projects have been financed by project-level debt that required long-term sales and purchase agreements. If LNG contract durations continue to shorten, and new buyers are less creditworthy, project finance becomes increasingly challenging. While we have seen some equity-financed projects announced, it remains to be seen if that will be replicated more broadly if access to debt is constrained. Moreover, US export growth has been driven by tolling-style agreements, and that business model may not be readily adaptable to other countries. Now is the time for companies to evolve and adapt to keep pace with market changes.
The next five years will be a challenging and dynamic period for LNG producers, traders, and buyers as they navigate a rapidly evolving market. Companies will need to remodel and reinvent themselves to deliver energy to a rapidly growing and changing world by exploring new LNG business models and new technologies ranging from big data to blockchain.
The way we work
- “Adapting traditional business models for an increasingly fragmented LNG industry,” LinkedIn blog by Andrew Slaughter, executive director, Energy, Resources & Industrials Research & Insights, Deloitte Services LP.
- “Becoming agile and staying competitive in liquefied natural gas,” LinkedIn blog by Bernadette Cullinane, partner, Oil, Gas & Chemicals Leader, Deloitte Australia.
- “US LNG sector on track for a big year ahead,” Upstream.
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