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The Future Role of LNG

Will liquefied natural gas catalyze a global natural gas market?
Fortnightly Magazine - November 1 2002

and even create a market for gas and LNG by investing in physical assets such as plants or networks. Power plants are seen as a perfect route to optimize the value chain and maximize margins from the integration of gas/LNG and power multi-utilities.

The second cluster contains domestic specialists. Sonatrach could exemplify this kind of upstream-driven model, and might need to expand its position outside the Atlantic Basin. In the third cluster you will find players like Gas de France (GdF) and Gas Natural Repsol, best described as downstream-driven players. Monitoring the movements of single players could indicate how this segment will develop in the future. Gas de France is increasingly focusing on acquiring and developing upstream assets and will become more upstream driven. Growing investments in Latin America indicate geographical expansion.

The fourth cluster could be described as integrated energy players. They can provide gas to end customers, as well as their own power generation businesses. Scale and economics of scope are driving both business segments. Here we find players such as El Paso, Tractebel, Iberdrola, Endesa, Union Fenesa, and Centrica. El Paso is a downstream player with significant upstream assets to support its gas supply operations. Its future direction will be to take a leading role in regions moving towards deregulation in Asia and Latin America. Tractebel will focus on exploiting arbitrage options within the Atlantic Basin and promoting new LNG ventures in Turkey, Mexico, Korea, and the United States.

It is above all the utilities-downstream-driven companies-that have to make some important fundamental decisions with regard to their procurement portfolios. It is here that LNG can play a key role. Involvement along the LNG chain, even it simply takes the form of a long-term contract, creates the potential for emancipating suppliers from the classical importers, and thus achieving a stronger negotiating position. LNG is the key to linking the traditionally distinct upstream and downstream worlds.

-W.H., B.H., M.W., and M.W.

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