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LNG dynamics and the corporate landscape

13 April 2016

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13 April 2016

LNG dynamics and the corporate landscape

Report summary

This paper, prepared for Wood Mackenzie's participation at the 2016 LNG 18 conference, looks at the shifting dynamics of the industry and the growing participation of the portfolio player. Lower demand and over-supply in Asia, has forced incumbent LNG buyers to develop LNG portfolios. LNG is now diverted or reloaded to international regas capacity or alternative markets. There are now risks that buyers could become dependent upon a small group of global portfolio players, as the BG acquisition by Shell suggests, while the growing appetite shown for equity LNG suggests to some that buyers may become excluded from supply access. However, it is more likely that the growing number of portfolio players will prevent such an outcome. As more portfolio players are established, competitive intensity is more likely to improve. Recent FLNG offtake deals show how new supply can be developed without dominant players. US LNG also continues to provide opportunities for new market entrants.

Executive summary
Introduction
Buyer dynamics
- Over-contracted Asian incumbents face growing competition from new entrants
- ...and need to develop global footprints
Seller dynamics
- Sellers are broadening access to customers
- ...with scope for seller cooperation
Rise of the portfolio player
- There are few pure portfolio players...
- but more companies are considering the advantages of portfolio
- ...and supply concentration looks set to grow
Conclusions