Liquefied Natural Gas (LNG) Market Analysis

The global LNG market size was estimated at 265 million tons in 2016. The rapid development of pipeline infrastructures, increasing demand for natural gas from downstream sectors, reduced prices, and favorable government regulations are some major factors driving the industry growth.

Increasing focus on the development of adequate support infrastructure in the emerging as well as developed economies is anticipated to propel the Liquefied Natural Gas demand over the forecast period. However, insufficient pipeline infrastructure in remote areas is likely to hamper the industry growth.

Growing urbanization, industrialization along with increasing number of power related projects such as city gas distribution and petrochemical are anticipated to contribute significantly towards the industry growth in upcoming years.

The easy accessibility of supply aids is expected to generate lucrative opportunities for power sector in Asia Pacific over the forecast period. China alone accounts for 40% of global demand growth. After a phase of slower growth in 2015-16, gas demand in China is expected to rise by 7.2% per year till 2025, aided by favorable rules & regulations.

China’s 13th five-year plan is expected to provide strong policy support for transportation fuel, helping it to counter competition from coal in various other end-use industries. Substituting coal in power generation, household heating and other industrial applications, has the potential to considerably boost the use of gas in China in upcoming years.

Application Insights

The global liquefaction capacity increased to over 339.7 million tons in 2016 owing to various major projects such as Sabine Pass LNG and Gorgon LNG in the US. Global liquefaction capacity is further anticipated to grow significantly over the next few years, with 114.6 metric million Tons of capacity under construction as of January 2017.

LNG continues to play a vital role in the power generation, mining and industrial sector with natural gas usage as a crucial feedstock for the power generating industries This has led to an increased consumption of 7% in comparison to 2015. The immense impact of fuel switching to LNG fuel is likely to impact the emissions generated by the transportation sector.

The rising demand for natural gas is highly beneficial for the environment owing to the reduced amount of harmful environmental impacts. The increased usage in the power generation, mining and industrial sector is showing a considerable change over the past few years. The low fuel switching cost, as well as the decline in the prices, are boosting the industry growth in the power generation and transportation application.

China, India, Japan, and Brazil are projected to account for the highest demand owing to rapidly increasing investments in infrastructure development and rising awareness regarding exceptional benefits of eco-friendly products across varied end-use industries. Favorable regulations in these markets have also attracted tremendous investments from foreign companies.

Regional Insights

Rapidly rising Liquefied Natural Gas production in Australia is expected to positively influence the power sector dynamics over the forecast period. However, rising demand from the east Asia with the nuclear plants is likely to negatively impact the energy mix of Japan and south Korea. India is likely to remain an attractive destination for the manufacturers and exporters owing to the surge in the infrastructure development.

In the Atlantic region, the Henry Hub Linked LNG price is projected to provide stimulus to the global pricing. Furthermore, Africa is also expected to remain a stimulating region with new production strategies and development from Cameroon in Mozambique.

Middle East is ready to engross spot and short-term volumes in terms of demand. Various countries are restructuring their gas markets to attract new investments. Several other economies including China, Mexico, and Egypt, are moving ahead with significant reforms, inviting more private participation in the supply, transport, and marketing, and familiarizing third-party access to gas infrastructure.

Incentives on various fuels are being reduced considerably in various parts of the Middle East, North Africa, Latin America, and Asia. This exercise is likely to expose power generation to more competitive pressures in comparison to other fuels and technologies. Prices that replicate the industry essentials are also likely to result into high consumption and increased investments.

India is expected to witness highest growth rate in Asia Pacific in upcoming years. Energy mix gas accounts for only 5% of primary energy consumption in India, providing plenty of space for expansion. Strong economic growth across the region is also leading towards higher utilization of gas based power facilities and improved application scope in the industry. These factor are expected to propel the demand for LNG in the Indian market

Gas consumption is anticipated to decrease in Japan in upcoming years. However, new policies in Korea are likely to generate ample growth opportunities. Japan and Korea consumed around 45% of the total traded volumes in 2016, with substantial volume shares as well.

These economies witnessed reduced production in recent years owing to several factors such as safety issues with nuclear power plants in Korea and an upsurge in gas use as a result of the East Japan Earthquake. This trend is anticipated to continue over the forecast period as well, resulting in reduced demand across the regions.

However, there are substantial uncertainties over the trajectory in both the economies. In Japan, twelve nuclear reactors have been permitted the green light from safety authorities and five more have restarted. Besides this, the new government in Korea has also formulated several favorable rules and regulations, targeting at a reduced usage of nuclear and coal-fired power. This factor is further projected to fuel the demand for LNG in near future.

Competitive Insights

The global industry is highly competitive and fairly concentrated, with top four companies accounting for maximum share of the global production. Key participants include BP plc, Royal Dutch Shell, Chevron and Exxon Mobil.

Application developments are expected to be the key parameter for being competitive in this market. The industry is also anticipated to witness frequent mergers and acquisitions as an attempt to diversify product portfolio and gain market share.