Large Potential for Small-Scale Liquefied Natural Gas (LNG) Projects

With global natural gas demand on the rise, liquefied natural gas (LNG) offers a flexible mode of transport between producers and consumers. Advances in production and transport of LNG have raised hopes that a narrowing gap in end-user prices between pipeline and liquid natural gas will lead to a more flexible, transparent and affordable global natural gas market. The United Nations Economic Commission for Europe (UNECE) has set out to develop best practice guidelines for its 56 member states to maximize the opportunities provided by these developments. The Capstone group analysed current trends in the LNG market and determined which trends will most have an outsized long-term effect on the international LNG market.

The report focused on four areas: regional supply and demand, pricing mechanisms and drivers, disruptive technologies, and policies.

First, there is a growing gap between importers and exporters pointing to increased LNG trade, with additional LNG capacity becoming necessary around 2025. Intra-regional infrastructure will be crucial to bring growing capacity to and from LNG facilities. In the current market of low oil prices, divergence from the historic oil-to-gas price ratio may affect the economics of potential projects. Third, disruptive technologies will potentially add more flexible supply options through increased use of small scale LNG and floating terminals to extend the supply chain into underserved areas. Finally, concerns around environment, energy security and economic development provide incentives for all major regions participating in the LNG market to support policies favouring LNG. While these trends will increase the relevance of LNG in global energy markets, decisions by policy makers will be key regarding the speed, availability and affordability of LNG. 

Related Press:  UNECE Published Report, "Assessment of Market Trends in Liquefied Natural Gas"