“A tidal wave of LNG is about to come into the global market. The sector will, on average, see a new four million tonne LNG train come online every month for the next two years. But demand hasn’t kept pace with this increase in supply, and with the current price of LNG at an all-time low, we’re moving into a prolonged period of LNG oversupply.
“Australia’s LNG companies, traditionally producers and shippers, also need to become adept at selling and trading LNG. In the past, their businesses have been designed around exploration and production to deliver primarily against the long-term contracts underwriting those projects.
“As the needs and demands of new and different, as well as existing, customers are changing, it’s imperative that Australian producers adapt to the new model of selling and trading on spot and short-term terms.”
Key findings from the survey reveal:
- Global LNG markets are maturing rapidly at the same time as many projects are transitioning from construction to production. Many LNG producers and customers may have less time to prepare, and more to do, than they realise;
- There appears to be a substantial divide in energy trading risk maturity between companies that are established globally as traders in multi energy commodities and the regional Asia-Pacific LNG-only focused companies. This is relevant in light of the rapidly changing market and customer demands;
- Organisations that have been marketing and trading commodities with more mature markets (including oil, gas and even iron ore) have existing marketing and trading functions, often with relatively mature trading and risk management frameworks developed over many years. They have also been able to leverage past lessons and existing risk management capability across their portfolios to extract flexibility and value. For companies without these established functions and experience to draw on, the rapid development of global LNG markets presents both significant threats and opportunities; and,
- The evolution of LNG markets, and the increase in sales and marketing activity and complexity, will place high demands on existing and new operations, and their owners. The need to establish and drive maturity growth in their marketing and trading functions, with a risk management framework a crucial part of meeting these demands, will become increasingly important, if not critical.