Liquefied natural gas (LNG) is one of the fastest growing sectors of the energy market. It is expected to almost double in size between 2005 and 2010, delivering around 40% of global gas supply growth in just five years*. In the US a significant increase in gas imports is expected to come from LNG. In Europe, many countries are making or considering investments in LNG import infrastructure.
The hype around LNG is intense. It is easy to overlook the fact that LNG is a means of delivery not a new energy source. LNG technology and infrastructure provide a means of monetising otherwise stranded gas reserves and bringing them to market. There are vast proven gas reserves but 91.2% of these lie outside of the main OECD market and much is beyond pipeline export reach. For upstream owners of gas assets LNG opens up a worldwide market for gas. For utility companies and energy departments in end markets it is a means of diversifying and securing energy supply.
Whether you are an LNG bear or an LNG bull, it is certain that LNG will play a growing part in the future gas market. However, the development of LNG projects and businesses presents considerable new challenges for companies, whether they are upstream national or smaller oil and gas companies looking to find new markets, super majors developing integrated LNG chains or utility companies aiming to secure and diversify primary fuel supply sources.
In this report we look at the challenges for the various players. We map the nature of these challenges – from handling geopolitical and trading risk to determining the best commercial and tax structuring – and the different strategies that need to be considered. We look at how the LNG market is evolving and changing from a previously concentrated market to a future where it will take on more of the characteristics of the global oil market. We look at where LNG is now and where it will be in the decade ahead.
We see a market that is characterised by both complexity and globalisation, in which the disaggregation of dedicated LNG chains opens up new potential opportunities. We look at how technological advances will hold the key to just how far this market evolution will run and the judgments companies and other players will need to make in response.
Throughout the report, we feature a series of "LNG dialogues", highlighting some of the critical issues facing companies in the LNG sector and the considerations they need to take into account. These are based on our experience of working with companies around the globe.
The future development of LNG as one of the fastest growing areas of the energy market worldwide will also require the development of new technologies and will depend on the pace in which they are put into practice. These challenges for the engineering sector and the shipbuilding industry will have a considerable influence on the investment programmes of governments, infrastructure and transportation companies as well as of private investors. Our report also covers these possible or, even, probable consequences.
*Source: International Energy Agency, Natural Gas Review 2006
