Here is who is doing business with the LNG
The LNG market has ended up in the hands of a small group of energy majors and trading companies. Here's what they are
The surge in LNG cargo prices has had the effect of concentrating business in the hands of a small group of majors and trading companies, leaving dozens of smaller players out of the market.
LNG cargo. A growing market
It is a long and detailed article by Reuters to tell us how the global LNG market has more than doubled in size since 2011, attracting dozens of new and small players who represented, just to give an example, 20% of all LNG imports from China alone.
The spiral of costs
But the explosion in spot cargo prices, which from a cost of 15/20 million dollars two years ago reached 175/200 million dollars, has changed the face of the market. Now the capital needed to carry out transactions has risen enormously after LNG benchmark prices have risen from just $ 2 per million British thermal units (mmBtu) to $ 57 last August.
The dynamics of prices have actually slowed down in recent times, settling at $ 38 per mmBtu. But, according to analysts, the market will continue to be characterized by high prices in the long term.
LNG. The 'commodity of the rich'
As Ben Sutton, CEO of Six One Commodities said, "the biggest challenge facing any market participant right now is credit."
“The explosion in the value of LNG cargoes”, adds Tamir Druz, managing director of Capra Energy, “together with the extreme volatility, are making it difficult for those players who operate with more modest budgets”.
"LNG is once again the commodity of the rich," said Pablo Galante Escobar, Global Head of LNG at Vitol.
A market that benefits the big players
Market conditions right now favor players with large and diverse portfolios and strong balance sheets. We are talking about majors like Shell, BP and Total Energies and major trading companies like Vitol, Trafigura, Gunvor and Glencore.
As Jason Feer, global head of business intelligence at Poten & Partners explains, it is estimated that of today's 400 million tons of the LNG market, Shell and Total Energies alone hold a portfolio of 110 million tons. If we add to these the portfolios of Qatar Energy (70 million tons) and that of BP (30 million), it results that these four big players control more than half of the market.
Record profits for the majors
It is no coincidence that Shell and Total Energies are recording very high profits, while Vitol's profits in the first half of the year are already higher than those of the whole of 2021.
To increase the business volume of majors such as Shell and Total Energies there are also purchases of US LNG through long-term contracts that allow them to resell gas purchased at a low price to the European market at higher prices.
The dynamics of high LNG prices will not subside anytime soon, and will continue to benefit the larger players. The independent consultant Guy Broggi is convinced of this for whom “we are entering an unmapped territory with regard to LNG markets and what will happen after the current crisis with Russia is difficult to imagine. The only sure thing is that higher prices will remain for longer "
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/gnl-mercato-ristretto/ on Wed, 28 Sep 2022 05:59:46 +0000.