Baku, Azerbaijan, Sept.19
By Leman Zeynalova – Trend:
Successful opening up of new LNG markets has increased the number of LNG importing countries from 18 in 2008 to 42 today, Gas Strategies, a management consultancy focused on the global gas and LNG industry, said in its report.
“The resulting proliferation of end-buyers is boosting competition and market liquidity. One driver has been the commoditization of floating storage and regasification units (FSRUs), which support the trend towards shorter-term contracts,” said the report.
Gas Strategies analysts note that new types of buyer have emerged, some better able to manage risk than traditional buyers and sellers, while others make financing a project trickier.
“They include portfolio players (such as Shell and Total), traders (such as Trafigura, Vitol and Gunvor), second-tier end-buyers who previously bought from state-owned entities, and end-buyers with non-investment grade credit ratings.”
Gas Strategies believes that of particular importance are the “portfolio players”, who aggregate supply and demand, creating more flexibility and optionality than is possible with bilateral contracting.
“Increasingly, these companies are playing a crucial intermediary role between LNG producers and end-buyers.”
Buyers, because of the pressures they are facing, are demanding greater contract flexibility and price mechanism diversity, the report reads.
“Japan, for example, has outlawed destination restrictions in LNG contracts. Buyer concerns include greater downstream competition and policy related to carbon emissions. Many traditional buyers are finding that demand is becoming less secure as downstream markets for gas and electricity are liberalized to foster competition.”
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