Skip to main content

LNG key to global energy security

LNG Industry,

LNG has the potential to create a global natural gas market, allowing natural gas to play a key role in transforming the world’s energy system to create a sustainable future, according to the United Nations Economic Commission for Europe (UNECE).

The statement from UNECE added that in view of the uncertainties caused by recent geopolitical developments in Europe, in particular the Ukraine crisis, LNG has the potential to improve regional and global energy security. These objectives however, can only be met if governments implement enabling policies that are clear, transparent and stable over the long term.

Key study findings

A team of international experts commissioned by the UNECE has released the findings of a study on the current status and perspectives for LNG. The study finds that:

  • LNG represents 10% of global natural gas demand (estimated in 2012 at 3300 billion m3) and 32% of global gas trade, and is growing faster than overall gas demand.
  • Because of the flexibility it offers in the delivery of gas, offering the possibility to divert flows or re-export as market conditions change, LNG is a key feature in the globalisation of the gas market, especially if a global LNG pricing pattern emerges.
  • LNG gives buyers many options to secure gas supply without necessarily having to commit to long term/high volume gas contracts with a specific producer.
  • Spot/short-term transactions represent 30% of total LNG trade today and prospects are that the LNG market will enjoy a fair degree of liquidity by 2020.
  • The current LNG price at Henry Hub is less than half the price at European hubs and less than one-fourth the average price paid in Asian markets. LNG transport costs alone do not justify these differences.
  • Since access to gas is not constrained by pipeline capacity availability or gas transit disputes, LNG can improve the security and diversification of supply.
  • Given the size and cost of its infrastructure, LNG is ideal for small, isolated markets or markets that require negotiating leverage with a supplier.
  • LNG has underpinned strong growth in gas-fired power generation in countries that changed their nuclear policies following the Fukushima accident.


Asia represents 60% of global LNG supply and its share is expected to grow in view of rising demand from emerging economies and attractive prices for LNG. In Japan, LNG demand for power generation increased by approximately 30% in fiscal year 2011 following the Fukushima nuclear accident. China and India will be especially important in future LNG market dynamics.


In Europe, decreasing domestic gas production and efforts to diversify supply sources are drivers for LNG growth. LNG’s market share is forecast to move up from 15% in 2010 to 24% in 2020 according to the BP Outlook.


US shale gas deliveries grew from approximately 20 billion m3 in 2005 to an estimated 280 billion m3 in 2013, 40% of total US gas production. The US Department of Energy has authorised exports of 35 billion m3 of surplus natural gas in the form of LNG in 2016, and further projects have been submitted for approval. Overall US exports could reach approximately 70 billion m3 by the mid-2020s. LNG exports from US and Canadian terminals are economically competitive in all major markets, including Europe and Asia Pacific, based on forward gas price differentials.


The study also identifies a series of challenges including:

  • LNG markets today remain regional because the availability of shipping does not match the fast growing LNG trade and because a fairly limited number of global operators control a substantial share of ‘free’ LNG.
  • An integrated LNG project typically takes approximately 10 years to put into place and requires high upfront capital investment. This calls for strong commitments among partners, including financial participants and clear long-term policies.
  • Whether it is possible to find business models suited to attract investment that are compatible with competition-seeking rules such as unbundling commercial activities from infrastructure management, or with the scepticism of authorities about long-term contracts.
  • Full harmonisation of traded LNG quality is unlikely, however some degree of harmonisation of LNG specifications is needed to ensure it is acceptable at all LNG terminals and by a majority of end users (especially for combined cycle gas turbines).


The statement concluded: “There is a huge body of knowledge on operational issues regarding LNG that must be normalised and disseminated if LNG is to become a truly global industry. Players throughout the LNG chain, including regulators, should be encouraged to standardise and exchange information. Such efforts would improve compatibility and efficiencies and maintain safety levels throughout the industry.”

Adapted from press release by Katie Woodward

Read the article online at:


Embed article link: (copy the HTML code below):