I’m been reading a lot about LNG and it seems very interesting. I am planning to write a market report to summarize my understandings. Was hoping someone could share their insights on the driver/risk/fundamental. Or direct me to some resource you found helpful.
Thanks!
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LNG is super interesting and something I like to keep track of.
I recommend some of the following reports from KPMG:
https://home.kpmg.com/xx/en/home/insights/2017/04/winning-transformed-m… In depth insight to the mechanics of the LNG market
https://home.kpmg.com/xx/en/home/insights/2016/03/gas-lng-portfolio-con… gain an asset optimisation perspective
https://home.kpmg.com/xx/en/home/insights/2017/06/trade-patterns-and-pr… New pricing methods for LNG cargo; shift from oil-linked index to JKM
https://home.kpmg.com/xx/en/home/insights/2017/06/demanding-customers-w… Global customer analysis
I also recommend reading “The New Geopolitics of Natural Gas” by Agnia Grigas. It is super informative of the development in the gas and LNG markets over the years.
P.S. If you ever do write that report then please let us know when you release it, I would be interested in reading it
All the links are broken
I just fixed it
https://rbnenergy.com/taxonomy/term/58</a">https://rbnenergy.com/taxonomy/term/58
Short LNG - Idea (Originally Posted: 04/16/2014)
A lot of people getting hard-ons for LNG, especially since the shale revolution in the states have created a glut of supply and pushed nat gas prices down. People are jumping on anything to do with LNG and there have not been a lot of opposition to this sub-sector.
Over next five years LNG production set to increase by more than 30% with Australia leading the way. In the US, behind Cheniere’s Sabine Pass, there are 20 planned liquefaction plants that would add more than 175 mtpa of capacity or a global increase of 45%. Even if only half come to fruition, that’s a lot of LNG coming to the market. This does not include Canada’s planned 50 mtpa and the recent elephant gas deposits discovered offshore east Africa.
The costs of building LNG facilities are soaring, Australia’s project capex have increased by more than 40%. Huge problem because LNG facilities are normally in the middle of nowhere.
Lastly, the current demand situation will not last. The Fukushima disaster had made Japan reliant on LNG, but Shinzo Abe has made it clear he will restart the nukes. Which country out there really needs LNG? China? They are the largest builders of regasification plants, but if LNG prices get too high, they have plenty of domestic gas and even Russian gas to rely on.
Quick summary of why to short LNG:
Super short. Please critique
Everybody west of the Urals, for one
IMO the biggest need for cheap nat gas is from the petrochemical industry, more specifically place with high feedstock prices like Rotterdam. Spreads btwn the feedstock in Europe vs what it would be if they could get feedstock from the US are huge. I think that if they started to ship LNG to these petrochem markets that have high feedstock prices and you found a way to play it, you could make a lot of money.
Unfortunately I don't think this will materialize any time soon, if ever. There is way to much political pressure to prevent shipping a significant amount of natural gas outside the US. You look at people like the Koch brother, what's there biggest money maker? Petrochem. So by having a very cheap feedstock they they have a huge competitive advantage vs everyone else. You combine that with their large political presence, and it wont surprise me to hear about them lobbying to prevent LNG exports and/or if a lot of the planned LNG terminals in the US don't end up getting built.
Europe may need nat gas, but they don't have the infrastructure. Plus everything they import Qatar can easily supply.
All I can say is goodluck. Why not just go long coffee?
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