Regulation, Supply and Demand
The Loyola de Palacio Series on European Energy Policy
Chapter 3: Gas supply: the role of liquefied natural gas
During the last decade, the LNG industry altered substantially. Traded volumes increased by an annual average of 7 per cent from 2000 on. New players entered the market and new trading patterns evolved. On the one hand, vertical and horizontal integration have become more common, with traditional oil and gas majors investing in a portfolio of LNG export, transport and import capacities, which enables flexible trades. On the other, new business models of non-integration emerged. Long-term contracts with a duration of more than 20 years co-exist with short-term agreements. Recent developments in unconventional gas resources change the global supply picture. The past economic crisis still entails short-term over-capacities in the global natural gas export market and supports the development of a buyers’ market at least for the medium-term future. The survival of incumbents and new entrants strongly depends on their ability to operate economically and adapt to the changing market circumstances. This chapter therefore discusses recent dynamics in the liquefied natural gas market as well as changing corporate strategies regarding contracting patterns, horizontal integration (i.e., investments in various export and/or import markets) and vertical integration along the LNG value-added chain.
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