In 2016, the Boston Consulting Group (BCG) predicted that the LNG industry was entering a challenging period. The reason: a growing imbalance between supply and demand. One year later, developments in the LNG market have borne out that prediction.
Highlights from the BCG research on the LNG sector:
- Healthy annual compound growth of 1.5% expected 2015 – 2025; base case scenario of 0.5% growth per annum even if conditions are challenging (e.g. renewals taking off very quickly).
- LNG demand returned to growth in 2016, after remaining flat 2011 – 2015 (due to high LNG prices and limited supply); expected to continue at min. 5.3% per year base case scenario (from 332 billion m3 in 2015 to 559 billion m3 in 2025), driven by demand from China and India and new niche markets.
- However, strong supply growth is likely to result in oversupply by 2019, following the largest supply increase in its history – 14 projects are due to become operational before 2020, with a combined capacity of approximately 200 billion m3 a year (45% of the global supply in 2015).
- This is likely to result in increased liquidity, with spot and short term volumes already increasing rapidly: from 25 billion m3 to 100 billion m3 between 2005 – 2015, and expected to reach 250 billion m3 by 2025.
- Emergence of niche markets, involving smaller, shorter term, higher-risk contracts: the number of countries importing LNG grew from 9 in 1990 to 31 in 2015, and the trend is expected to continue; potential new entrants include Bangladesh, the Philippines, Malaysia, Indonesia, Bahrain, Panama, Uruguay, Colombia, the Caribbean region, Morocco, and South Africa.
The full report can be found at bcg.com
Read LNG Industry's April 2018 issue for a full-length article from the Boston Consulting Group on their findings.
Read the article online at: https://www.lngindustry.com/liquefaction/17112017/the-evolving-lng-market-2017/