LNG Contracting up as Global Gas Markets Open: IEA
Global gas markets last year continued to consolidate and evolve towards greater flexibility, energy watchdog International Energy Association said September 26, launching the fourth edition of its survey, Global Gas Security Review. This was driven by the increasing role of portfolio players, transforming business models, contracting trends and growing downstream flexibility requirements.
LNG contracting activity rebounded to reach its highest level in five years in 2018, mostly resulting from newly sanctioned liquefaction projects. The contracting actions of market participants, especially portfolio players, have ensured that most contracts concluded in 2018 are destination‑flexible. This has continued into this year: 2019 to date has already seen the most natural gas liquefaction capacity ever sanctioned in a single year.
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Much of the growth in LNG consumption is occurring in countries where LNG competes with other sources of natural gas and fuels, meaning LNG importers want more flexibility. The development of LNG spot trading, the growing share of destination-free supply contracts, and the rise of portfolio players as key buyers are all signs that the LNG market is responding to these increasing demands.
Contract flexibility is evolving to further strengthen security of supply in Asia. Long-term contracts involving traditional buyers can provide more operational flexibility than is generally recognised. Volume options, including diversions, open up the potential for increased co‑operation via intra-regional trade between LNG buyers.
In north‑western Europe, rapidly declining domestic production and increasing import requirements, coupled with growing volatility in gas demand, signify an emerging need to further enhance the system flexibility of the region’s downstream gas infrastructure, it said.