BAKU, Azerbaijan, Aug.21
By Leman Zeynalova – Trend:
The liquefied natural gas (LNG) industry needs new patterns for financing, Trend reports with reference to the Gas Exporting Countries Forum (GECF).
“The transformation of the liquified natural gas contractual structure vis-à-vis the growing share of spot and short-term trading, multilateral trading schemes, gas-on-gas indexation is leading to increased volatility in the LNG market. Such volatility is an impediment to the development of the gas infrastructure. Also, it creates a need for new patterns for financing the LNG industry as overall investment risks to be distributed in a manner to secure required financing for the upcoming LNG infrastructure projects,” reads the latest GECF report.
The organization believes that move to a more open and liquid LNG market will lead the key LNG stakeholders and players to search for optimal and lucrative trading strategies. A spot gas-on-gas indexation with destination-free contracts up to the traditionally established long-term oil-indexed destination-bound trades – all that represents a range of possibilities. “The latter is historically known for reinforcing market resilience and mitigating risks of increased volume and price volatility and supply disruption risks as well as allowing to secure long-term investment into LNG infrastructure. ‘Green’ LNG with a reduced carbon footprint is rapidly gaining momentum and will be vital for LNG industry development in the decades to come to match the environmental sustainability of the energy transition.”
The report says that LNG buyers are increasingly considering LNG’s low-carbon properties on top of price competitiveness.
“The market witnessed a spike in carbon-neutral LNG deals in late 2020 and early 2021 as increasing pressure came from governments’s changing policies and tighter regulations. Furthermore, the corporate sector’s shareholders and investors are increasingly becoming more conscious about LNG’s carbon footprint. Asian buyers' interest in 'green' LNG continued to ramp up last year, crystallising a new sustainable trend of future LNG trading.
When carbon emissions couldn’t be avoided, they can be either (i) reduced or/and (ii) offset with the purchase of nature-based carbon credits and verified carbon standard certificates. Both carbon emissions reduction strategies should imply more rigorous emissions measuring, verification, and reporting with enhanced and clear guidelines together with emissions transparency along the LNG value chain. Carbon-neutral LNG price assessment activity is also underway”.
Fitch Solutions says that the growth of liquefied natural gas is expected to stand at 5.8 percent in 2021, as it will overcome the COVID-related challenges. The company expects LNG supply growth in every region, excluding Europe, due to a temporary hiatus in Russia’s export growth and the diversion of domestic supplies in Norway for LNG to pipelines.
“In other regions, some combination of rising domestic output and liquefaction capacity additions will support export growth, while subdued prices will help to stimulate gas demand and shoehorn LNG supplies into saturated energy markets. Base effects will flatter growth and the return of outed gas supplies and increased utilisation of legacy export terminals are a large part of the narrative. Meanwhile, new liquefaction capacity additions will be limited, including Corpus Christi T3 in the US, Portovaya in Russia and the de-bottlenecking of the Qalhat facility in Oman,” reads the report released by Fitch Solutions.
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