Cambridge Energy Research projects LNG industry to triple by 2020

The liquefied natural gas (LNG) industry will triple in size and become a major global energy player by 2020, Cambridge Energy Research Associates (CERA) said in a briefing in Istanbul, Turkey, Wednesday. The CERA study outlined three scenarios for the future of LNG, in which only one scenario forecast growth of 1.5 times versus 3 times.


By an OGJ Online Staff

HOUSTON, June 20 -- The liquefied natural gas (LNG) industry probably will triple in size and become a major global energy player by 2020, Cambridge Energy Research Associates (CERA) said in a briefing in Istanbul, Turkey, Wednesday.

Peter Hughes, senior director of European Energy, CERA, said, "The key challenge for the LNG industry ... is the acceptance of a move from the current traditional supply-driven model to one which is flexible and market responsive."

LNG's characteristics suit it to serve changing markets, he said, adding the changes include growing energy market liberalization and expanding competitive markets.

"Historically, LNG projects have not been able to move forward until all the gas is securely contracted for," Hughes said. "Europe and Asia have, however, embarked on the path to liberalization which should see pricing structures converge toward the US model, and interregional LNG trade could be a catalyst in this process."

Hughes predicted a growing interest in monetizing a growing inventory of stranded gas reserves.

The CERA study outlined three scenarios for the future of LNG. The "competitive rim" scenario foresees flourishing free trade, strong economic growth, and low capital costs, propelling LNG demand to "more than triple by 2020."

Under these circumstances, megapipeline projects would launched, with LNG developing new, small markets that grow over time. LNG developers would find innovative financing methods, new players would enter, and producers would increasingly accept volume risk.

The "shattered paradigm" scenario foresees LNG demand tripling in 20 years although contracting and pricing are driven by cyclical economic growth. In this case, LNG projects would undergo a radical change in traditional structure and management.

The "high seas" scenario foresees deteriorating global relations in which total LNG demand would expand only 1.5 times by 2020. This scenario would be accompanied by a decline in free trade and slow economic growth leading to slow market deregulation.

While this is a low-growth scenario for gas, LNG still would have advantages over pipeline gas in terms of greater flexibility to switch between markets, better security, and smaller, more easily financed projects.

In a separate keynote speech at the conference, Vittorio Mincato, Eni SPA CEO, said forecasts about future equilibrium of global gas demand and supply tend to be too optimistic.

"We now see that in the next 5-10 years, we could face a possible natural gas supply shortage in Europe due to the lack of new infrastructures for importing gas and to the difficulty of matching the high cost of much-needed new infrastructures with current gas prices in continental Europe," he said, adding that could trigger higher gas prices.

More in LNG