Future liquefied natural gas business structure: a review and comparison of oil and liquefied natural gas sectors

Abstract

The liquefied natural gas (LNG) trade provides the means of trading gas globally and represents about 10% of the gas trade. The forecasts show the LNG business will grow, over the next 20 years, at about twice the rate of the whole gas trade. Although the current state of LNG trade is well studied, the literature on the future business structure of it is limited and conflictual. This work considers the future LNG business structure by comparing the development trajectories of the oil and LNG sectors. In addition, it assesses the conclusions drawn by researchers against this background and the current pattern of change in the industry. The comparison involves three stages: (1) trade flows-oil and LNG trade flows are very similar, mainly due to the common distribution of the oil and gas reserves. (2) Supply chain configuration-the international trade for both fuels is tanker based thus allowing for a similar market responsive trade policy, i.e., real-time destination selection (spot sale) at a global scale. (3) Institutional developmentsthe current transparent and competitive global oil trade, with prices dominated by physical and paper markets, was driven previously by long-term contracts, in the same manner as the current LNG business. This analysis, together with transaction cost economics, supports the argument that, in future, LNG spot trade will increase and give rise to a competitive and globally unified LNG market. Furthermore, LNG pricing will become transparent and would be dominated by physical and paper markets benchmark prices.

Spatiotemporal Evolution and Market Dynamics of the International Liquefied Natural Gas Trade: A Multilevel Network Analysis

“…The trade flows created by international trade cooperation, which spatially entwine to create an ever-expanding global trade network for LNG, are undoubtedly the most comprehensible structural manifestation of the market's dynamic evolution. In this context, some studies have attempted to analyze the potential pattern and future development trend of the LNG trade market from the perspectives of industry structure, influencing factors, and trade prediction simulation, and the findings of these studies have been useful in understanding the dynamics of the LNG trade market [14][15][16].…”

Value of long-term LNG contracts: A theoretical and empirical study

“…With the rapid growth in the share of short-term and spot LNG trading (Aune et al, 2009), a more liquid and arbitrageable spot market is emerging. This is not only driving the formation of a global gas market, but also eroding the value of LTCs (Nikhalat-Jahromi et al, 2017b). In the future, whether long-term LNG contracts will be completely replaced by STCs remains to be further analyzed.…”

Strategic and flexible LNG production under uncertain future demand and natural gas prices

“…As such, the LNG supply chain consists of four main functions: (a) exploration and production; (b) treatment and liquefaction; (c) shipping transportation; and (d) regasification and distribution to the buyer's local market. Amongst these, the liquefaction process is considered the most capital and energy intensive part of the plant, where up to 40–50% of the capital expenditure of the project is spent [ 3 , 4 ]. In recent years, with the rise in demand for natural gas, several studies have focused their attention on the economic evaluation of the LNG and natural gas supply chains [ [5] , [6] , [7] , [8] ].…”