The LNG industry has evolved adjacent to the oil industry, but today it is in the throes of a transformation like that of oil in the early 1980s. Then, the oil market changed forever: from a business dominated by vertical integration, official prices and point-to-point flows, to one with a diverse mix of buyers, traders and sellers, and made newly transparent by the Brent benchmark.
Something similar is happening to LNG now. Prices are becoming more transparent, the universe of players has expanded dramatically and new suppliers and new markets appear on a regular basis. What was once a straightforward resource-led ‘floating pipeline’ from liquefaction plant to terminal has become a more flexible arrangement, where new business models and trade opportunities are essential to succeed. It is now less important where the molecules come from and more important where they go.
Following demand is not enough: successful LNG suppliers and traders have to create it. This report, following Uncharted waters: LNG demand in a transforming industry (KPMG, November 2015), marks the start of a new series exploring LNG markets — how they are changing, why, and how participants can change their business models to stay competitive.