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High oil and gas prices, world-scale infrastructure commitments and market integration have conspired to globalize LNG on a grand scale from what many considered a niche industry a few years ago. Although there were only 12 LNG-exporting countries in 2004, the number is increasing. Over the next seven years the industry is expected to grow more than it did over the previous 40 years.
Regasification capacity additions are expected to outpace new liquefaction capacity, reflecting the lower unit construction cost of regasification relative to liquefaction and the increasing value of optionality in the marketplace. The number of countries installing the infrastructure necessary to accept LNG imports is dramatically increasing.
The need for firm transport arrangements and the availability of capital are expected to yield a robust LNG shipping/charter market in the coming years. While such investments are thought by some to be value-diluting on a one-off or stand-alone basis, they will increasingly be seen as necessary to the execution of supply-chain integration schemes. Qatar and Nigeria are the most likely sources of new orders over the next few years. Iran, North West Shelf, Peru and Angola are also expected to be sources of new orders.
However, the LNG industry is on the cusp of major change – a group of highly motivated entrepreneurial firms, 21 in total from China, Japan, Australia, Indonesia, Norway, South America and North America, are using standardized liquefaction technology with capacities less than 3.0 million metric tons per year (mty) to develop new gas markets and go after fields too small for world-scale trains.
Currently, global medium-scale liquefaction capacity (at roughly 1.0 million mty) is small, but already another 6.0 million mty is under construction for commissioning during the next three years. Public equity markets are enthused. Seven different markets in Hong Kong, Sydney, Oslo, Jakarta, London and New York offer stock of twelve of the entrepreneurial enterprises; nine can be considered pureplays, valued at $3.5 billion. If they are successful, these firms will bring in large amounts of LNG supplies, as perhaps hundreds of fields less than 10 trillion cubic feet are monetized. LNG would then more closely resemble the LPG industry, where suppliers, distributors and transporters of all sizes and business models compete for a larger market.
These newcomers are highly diverse, ranging from upstart firms comprised of seasoned LNG Executives, to new management teams in staid enterprises. Some intend to seize first-mover advantage by taking regional markets. Others are attempting to pioneer whole new classes of technology, such as LNG floating production storage offloading (FPSO) vessels. They all share, however, the common goal of using modularized equipment, manufactured and assembled efficiently with short lead times, and standard business practices to develop projects simultaneously.
ZECG brings both broad and deep experience that spans the entire LNG value chain. Capabilities include expertise in feasibility, benchmarking, best practices, market structure, logistics, engineering and design, project development, regulatory affairs and government policy, construction, commissioning, troubleshooting, debottlenecking, plant operations and fleet management.
Integration of LNG receipts into the gas infrastructure involves an understanding of existing coastal distribution and long-haul pipeline systems, legal/regulatory/siting issues, environmental/safety
issues, gas interchangeability, basis differentials and seasonal demand under myriad scenarios. Prudent planning requires linear programming optimization of the pipeline grid, a specialty that ZECG offers.
ZECG can identify optimal monetization and transportation alternatives against relevant local, regional and global value chain approaches, including CNG, pipeline, gas-by-wire, etc., and market analysis can establish pricing structure and contract mechanisms and predict LNG's ability to penetrate (be absorbed by) end-markets.
ZECG provides unbiased, expert advice to upstream, midstream and downstream participants in the LNG trade.
Industry Insights: LNG |
