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Global LNG Outlook 2020

Published by , Editor
LNG Industry,

Nick Prowse and Penny Cygan-Jones, Norton Rose Fulbright, UK, take a look at what’s on the horizon for the year ahead.

2019 has seen the start of a re-shaping of the LNG industry, with the promise of further changes in 2020 and beyond. As well as new import and export countries entering the market, the year has been marked by the development of mega-liquefaction projects, particularly in the US, Russia and Qatar. Developments in technology are opening up previously stranded reserves and there have been significant moves towards the commoditisation of LNG. In this article, Norton Rose Fulbright takes a closer look at how some of these themes are playing out in different regions.

The US1

The US has gone from being an importer of LNG to being one of the largest exporters in a very short time, with plans to double its production again. There are currently nine LNG trains operating and producing LNG,2 plus Kinder Morgan’s Elba Island liquefaction project placed its first train in commercial service in October (although as of the time of writing no commissioning cargo has been loaded and shipped). All of these projects were designed to take advantage of the ‘great shale revolution’ in the US and the corresponding upheaval in the supply and demand dynamics of the domestic natural gas market. Consequently, the US has already become the fourth largest LNG supplier globally (behind Qatar, Australia and Malaysia) and, by adding 8.2 million t of LNG to global supply in 2018, it is second only to Australia as the largest driver of supply growth.3 Furthermore, as these ‘first wave’ projects emerge from the development and construction phase to become operational, the ‘second wave’ is becoming a reality with four more projects making firm progress.

The emergence of US LNG exports has likely been the most significant development affecting the global LNG trade over the last few years. The de-coupling of LNG and crude oil with the introduction of Cheniere’s Henry Hub-based pricing formula, combined with the elimination of ‘destination clauses’ (removing restrictions on cargo destinations and allowing diversions) from US LNG sale and purchase agreements (SPAs) has contributed to accelerated growth and liberalisation of the global LNG trade, including in the spot market, which accounted for 31% of total global LNG trade in 2018.

Alongside this significant growth in the physical trading and delivery of LNG on a spot basis, the industry is seeing an increase in the development and volume of financial trading of LNG, largely in the form of futures contracts. LNG futures contracts have been around for a few years, but meaningful penetration and growth in trading volumes emerged only in 2017/2018.4

One of the key issues hindering the development of LNG as a global commodity has been the lack of physical trading hubs in different regions. While natural gas trades and physically settles at the Henry Hub (and other points) in the US, the National Balancing Point (NBP) in the UK, or the Title Transfer Facility (TTF) in the Netherlands, a true physical trading hub in LNG has yet to develop and emerge in a meaningful way, despite the efforts of initial contenders, such as Singapore, to develop a liquid financial derivatives trading market for LNG with its SGX LNG Index Group spot price index (which ceased publication on 31 October 2019), and leading importing countries, such as China and Japan. However, on 14 October, CME Group published its new LNG futures contract – the ‘Gulf Coast LNG Export Futures’. According to CME, this new contract is the first-ever physically delivered LNG contract, which is listed with and subject to the rules and regulations of NYMEX. The Gulf Coast LNG Export Futures contract applies to all LNG bought or sold for future delivery on NYMEX with delivery at Cheniere’s Sabine Pass LNG terminal facility (CME Group also reported that the Freeport LNG terminal and additional facilities will be included as loading ports in future delivery months). The publication of this contract is certainly an important milestone in the development of a physical LNG trading hub, though its practical implementation and effect on the global LNG industry remain to be seen.

As further evidence of the development of LNG as a commodity in the global marketplace, Freeport LNG announced that it will operate the first ever ‘virtual’ LNG store-front in Redwood Marketplace – an online commodity trading platform that will enable bilateral negotiation and confirmation of commercial terms between buyers and sellers.

The US Geological Survey (via the Department of the Interior) reported in October 2019 that the Marcellus and Utica shale basins hold an estimated 214 trillion ft³ of ‘undiscovered technically recoverable’ natural gas. If this is correct, there is ample reason to conclude that production of US LNG will continue to grow and increase market share for the foreseeable future.


  1. AYALI, N., Partner, and MAJEED, K., Associate, Norton Rose Fulbright US LLP.
  2. Five trains at Cheniere’s Sabine Pass LNG; two trains at Cheniere’s Corpus Christi LNG; one train at Sempra’s Cameron LNG; and one train at Dominion’s Cove Point LNG.
  3. International Gas Union 2019 World LNG Report.
  4. CME Group, ‘Monthly Exchange Volume Report’ (November 2019).

This is an abridged version of an article that was originally published in the December 2019 issue of LNG Industry. The full version can be read here.

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US LNG news