On the other hands, 69% stated that uncertainty regarding prices is limiting spending in the mega-projects needed to feed the world's growing demand for LNG. In addition, DNV GL forecasts global LNG production will rise from 250 million tonnes per year (mt/yr) in 2016 to about 630 mt/yr by 2050.
Moreover, the report says that oil-indexed LNG pricing is part of the issue. Namely, recent oil price swings have made LNG sellers reluctant to peg decades-long contracts to volatile crude markets. However, they still need long-term commitments to make infrastructure investments viable. In this aspect, 49% of the LNG professionals questioned expect contracted LNG prices to continue to be linked to the oil price, while 30% disagree.
What is more, the respondents expect the US (36%) and Australia (16%) to face the biggest growth in LNG exports over the next three years, while other nations, like Canada, Russia, and Africa are also taking steps for a slice of the LNG action.
Nonetheless, conventional gas from the Middle East and North Africa, as well as North American unconventional gas, will account for 70% of LNG liquefaction capacity by 2050, DNV GL’s 2018 Energy Transition Outlook notes.
China will experience the biggest growth in LNG imports over the next three years, mainly driven by the country's blue sky policies. These aim to reduce fossil fuel emissions and improve air quality. Other emerging economies, especially in the Indian Subcontinent and Sub-Saharan Africa, will also be drivers of demand towards 2050.
This level of supply and demand however, will need to be met by the relevant investment, and particularly facilities to re-gasify, store and distribute new liquefaction capacity. The costd of financing new infrastructure will greatly affect the global LNG market in 2019, 36% of the respondents believe, while political risk is the leading market barrier (17%).
As reservations over capital spending and uncertainty over LNG pricing persist, the study reveals increasing interest in the sector finding more agile and flexible approaches to LNG production and trading
informs Hans Kristian Danielsen, senior vice president and Marketing & Sales Director, DNV GL - Oil & Gas.
What is more, agile approaches to LNG production could come in the form of smaller-scale FLNG projects. Smaller FLNG vessels and LNG tanker conversions are preferred by 59% of LNG professionals over the development of larger floating production units. This is because these units are cheaper to build and operate, quicker to deploy and more effective at exploiting smaller volumes of stranded gas for more markets.
Continuing, contractor-led operating models are also becoming favourable for LNG production, the report adds. In these cases, a contractor liquefies gas on behalf of an operator, who can limit risk by buying a service rather than a costly asset. Under this aspect, 55% of senior oil and gas professionals believe it is possible that operators will outsource or lease critical field development assets in 2019.
Furthermore, agility will be important to protect LNG buyers against risk. Specifically, 72% of LNG professionals consider that buyers need more flexible contracts, where LNG volumes can be decreased, tenures shortened, and delivery locations changed.
New market actors could provide the solution, by bridging the different interests of LNG buyers who want flexibility, and sellers, who seek long-term cash-flow certainty to support major investments.
You may see more information in DNV GL's 'The LNG era takes shape'