Oxford Energy Forum – LNG Markets: the great reconfiguration – Issue 106

The LNG market has seen dramatic shifts in its underlying fundamentals since the mid 2000s. The roller-coaster of pricing, the rise of LNG spot and short term trading and the emergence of the US as a source of ‘destination flexible’ supply are just some of the many dimensions of the industry which appear in a state of flux, not least due to the imminent arrival of new substantial supply from projects in Australia and the US. In September 2016 OIES and KAPSARC published ‘LNG Markets in Transition – The Great Reconfiguration’. This Issue of the Oxford Energy Forum comprises articles from several of the book chapter authors and the editor who provide summaries of their key findings.

In summing up, Anne-Sophie Corbeau, the book’s editor, argues that the LNG world is undergoing a `great reconfiguration’, in terms of volume expansion and changes in commercial models including the dominance of long term contracts. She suggests that aside from partial extensions of existing contracts, as LNG markets move towards greater commoditisation, there will be no turning back to the traditional long term contract model. Whether new projects proceed without traditional long-term contracts will depend on lenders accepting that short term LNG trade will become the norm, with reliable spot price benchmarks and lower LNG costs supporting project economics. This should enhance the role of LNG in the development of flexible international gas trade, and hence make a major contribution to the increasing globalisation of the gas business.

By: OIES

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