Liquefied Natural Gas which is also known as LNG. Hence, a part of the Petroleum Industry. It can also be deemed as the energy source of the future due to the fact of its minimalist emission of greenhouse gases which can help combat Global Warming. It is one of the probable tools that the automobile manufacturers can use to for the strict norms of the European Union to achieve 40% reduction in greenhouse emission by 2030. However, one of the biggest concerns for LNG is that it needs to be transferred using pipelines, hence limiting it to the local markets.
USA, Russia, Iran, Canada & Qatar are the largest producers of natural gas and hence the major companies producing natural gas are state owned. The top 5 publicly traded companies are Shell, Cheniere, ExxonMobil, Total & Chevron.
Cardinal wave of LNG projects, which are now operational now, their bricks were laid a decade back. The year 2019 is becoming the year of LNG investments, as it has been at the highest of all time of $50 Billion. The driving force behind it is also the attractive energy market of Asia. Japan being the biggest importer of LNG closely followed by China, which will overtake Japan in the coming years. Final Investment Decision (FID) are also on an all-time high.
Major Investments by companies into LNG in different countries are:
- Shell (one of the LNG producing company) is a major stakeholder in Canada’s only LNG plant worth $31billion partnering with Petronas and few other players.
- Exxon and Qatar Petroleum reached a FID in Feb 2019 Golden Pass LNG. Andarko announced FID in Area 1 Mozambique, also Artic gas & Qatargas are planning for FID with investment of $25.75 billion & $17.5 billion.
- India didn’t want to stay behind in the race for procuring and investing in LNG, due to which the Hon’ble Prime Minister Narendra Modi, on his recent trip to USA, the Hon’ble Prime Minister held meeting with several LNG companies. One of them was Tellurian, with which India based Petronet LNG Ltd signed a MoU worth $2.5 Billion. Petronet being India’s largest importer of LNG.
- Total has purchased a 37.4% stake in Adani Gas, which will help Total bring investment into LNG and increase Adani’s retail business.
The market for investing in LNG companies and LNG as an industry has been rising, but the critics and analysts want the industry to be cautious as they’re notorious for overspending than the provided budget, only 10% of all LNG projects have been constructed under budget. Delays are another part of the issue, where 60% of the projects have experienced delays.
Most of the projects looking for FID, present low project costs to please the investors, which overall makes the investor to spend more. The risk also increase with the low prices of LNG, which can even lead to cancellation of few of the projects which are not financially viable for the investors.
Thank You
Regards
Milind Sharma
Kautilya
IBS Mumbai
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