Liquefied Natural Gas (LNG) Market

Market Overview

The global LNG market size was valued at USD 63 billion in 2021. It is estimated to reach an expected value of USD 533.84 billion, growing at a CAGR of 26.8% during the forecast period (2022-2030). Factors like the growing demand for gas for power generation and the rising number of LNG-fueled fleets stimulate market growth.

Natural gas is cooled to -162°C to create liquefied natural gas (LNG), an odorless and colorless liquid. Gas volume is reduced by 600 times during the liquefaction process, making storage and transportation easier. Once this gas has arrived at its destination, it is transformed into gas through the regasification process and sent through pipes and vessels to end users. As it burns cleaner than gasoline and diesel, liquefied natural gas is a newly popular fuel. Over the forecast period, key factors, including rising global natural gas liquefaction capacity, government initiatives to strengthen gas pipeline infrastructure, and increasing demand for a clean energy source from several end-use industries, are anticipated to fuel the growth of the global liquefied natural gas market.

Market Dynamics

Market Drivers

Growing Demand for Gas for Power Generation

For several years in the past, natural gas has witnessed significant growth in its production and consumption due to the countries shifting from coal to natural gas as a primary energy source for cleaner energy. In 2019, the global natural gas production was 3989.3 Billion Cubic Meters (bcm), which rose from 3318.9 bcm in 2012. Globally, the leading players in the natural gas sector are the United States, with a production volume of 920.9 billion cubic meters, and Russia, with over 679 billion cubic meters in 2019.

The growing demand for natural gas for power generation has increased natural gas consumption from 3322 bcm in 20212 to 3,929.2 bcm in 2019. A similar trend is predicted to continue, with more countries committing to reducing carbon emissions. Moreover, the European countries are likely to witness growing demand for gas-based power generation as they plan to meet the Paris agreement target signed in 2015. Hence, the increasing demand for LNG is likely to foster investment in the LNG terminal and LNG carrier during the forecast period and thereby drive the market being studied.

Rising Number of LNG-Fueled Fleet

The use of LNG as a fuel is both a proven and commercially available solution. LNG offers enormous advantages, especially for ships, in light of ever-tightening emission regulations. Conventional oil-based fuels are expected to remain the primary fuel option for most ships in the mid-term, while LNG is likely to emerge as a popular choice in a long-term scenario.

The LNG-fueled vessels plying the oceans comprise passenger ferries, offshore service vessels, coastguard vessels, tankers, and many other types. Ship makers are increasingly focusing on using LNG as ship fuel, as owners, ports, and regulators have realized the benefit of this emerging technology. Furthermore, to promote LNG-fueled vehicles, the government in some nations is providing grants and other financial aid. For instance, to promote Singapore as an LNG bunker-ready port, the Maritime and Port Authority of Singapore (MPA) commenced its LNG bunkering pilot program early in 2018. Under the program, the MPA provided various companies with grants of up to SGD 2 million per LNG-powered vessel. Hence, such developments at the global level are expected to fuel the demand for LNG as a marine fuel during the forecast period and thereby drive the global LNG market.

Market Restraints

Trade Tension and Traffic Escalation

Due to the imposition of high tariffs and other trade barriers on China in 2018, trade tensions between the United States and China started. In retaliation, China imposed tariffs on US goods totaling more than USD 110 billion. The United States placed more than 360 billion USD tariffs on Chinese goods. The US imposed four rounds of tariffs on Chinese goods in 2018. The United States last imposed tariffs on food items and other musical instruments in September 2018. The trade conflict persisted until June 2019, when China levied a tax on US goods worth USD 60 billion.

The high tariff on both sides impacted international trade and shipping. The freight market rate for container vessels increased throughout its significant routes. For instance, Shanghai–United States West Coast and Shanghai–the United States East Coast are two busiest routes, on which the freight rate increased by nearly 16.9% and 14.2%, respectively, in 2018.

The COVID-19 outbreak gave the trade war a new facet. The US government blamed China for the pandemic and charged that it withheld crucial information about the initial virus outbreak in China. Even though the dispute had nothing to do with trade, a US official forbade Huawei, a Chinese company, from using US software and hardware in strategic semiconductor processes. The US also pressured the European government to forego working with Huawei. The United Kingdom recently barred Huawei from using its 5G telecom network in July 2020. As a result, it is anticipated that this situation will repeat the trade relations between the United States and China from 2018, which is likely to have a negative impact on the sea trade market and the market for LNG marine fuel during the forecast period.

Merging LNG Market in Africa Region

After several years of decline, Africa is poised to become a leading region for LNG. The region has a vast potential to produce gas commercially. But as of 2020, due to lack of infrastructure, the large gas fields remain undeveloped, and the operators that are making the associated gas in large amounts are flaring this produced gas.

The refining sector in the region is largely undeveloped. Most oil-producing African countries such as Nigeria, Egypt, etc. depend on imports to meet their processed oil demand. With new IMO standards in place, the shipping industry in the region can no longer use traditional heavy oil. With the lack of refining infrastructure, companies like BP, Eni, etc., are likely to be dependent on the imports of the low-sulfur-content marine fuel, whose demand is expected to exceed the supply capacity in the near future. Hence, alternative energy, like LNG, has significant potential to penetrate the bunkering market in the region.

Moreover, the increasing demand for gas, particularly LNG, and the rising pressure from the international community to stop gas flaring, have resulted in increased investment in the construction of gas transportation and gas processing infrastructure. For instance, Nigeria LNG planned a 7th LNG train, which in December 2019 received the final investment decision (FID). The commissioning of the train would increase the Nigeria LNG capacity to 4 million Mt/year. Also, in May 2020, Nigeria LNG announced the signature of the EPC contract for its Train 7 project, which, together with the debottlenecking of the existing six trains, will add around 8 MTPA of capacity to the Bonny Island facility, taking the total to about 30 MTPA by 2025. Such ambitious plans to increase its LNG capacity are expected to create immense opportunities for the global LNG market in the coming years.

Regional Analysis

Based on the Region, the global LNG market is segmented into North America, Europe, Asia-Pacific, South America, and the Middle East and Africa.

Asia-Pacific accounted for the largest market share during the forecast period. The Asia-Pacific region is still the primary source of imports. Due to the unusually chilly weather of certain nations, LNG imports exhibited a progressive recovery. Several new terminals are predicted to assist the region in meeting the rising gas demand during the forecast period. The nation is anticipated to rank among the top Asia-Pacific countries in terms of investment. The market under study is projected to develop due to the rising demand for LNG as a marine fuel, which will also encourage investment in LNG infrastructure.

Europe is the second largest region. One of the significant LNG-importing regions worldwide is Europe. In recent years, receiving terminals with various service options have appeared in the European region. The airports have services like reloading, transshipment, LNG bunkering, and truck-loading in addition to the standard regasification operations. Europe will continue importing sizable amounts of LNG throughout the projected period to meet its natural gas consumption. The market is projected to be propelled by rising LNG volumes discharged at Europe's regasification terminals.

North America is the third largest region. In terms of LNG exports and advancements involving LNG infrastructures, such as LNG liquefaction facilities and storage terminals, North America is one of the fastest-growing LNG markets. The three main LNG markets in the region—the United States, Canada, and Mexico—are anticipated to have rapid expansion throughout the forecast period. Additionally, it is expected that these nations will export more LNG than natural gas pipelines. The Freeport LNG facility is a significant undertaking that has assisted the United States in increasing its capacity for LNG export leading to the market growth of this region. North America is one of the fastest-growing markets regarding LNG exports and developments related to LNG infrastructures, such as LNG liquefaction plants and storage terminals. The United States,  Mexico, and Canada are the three largest LNG markets in the region, which are expected to witness significant growth during the forecast period. Another major project that has helped the United States to ramp up its LNG export capacity is the Freeport LNG facility. In January and May 2020, trains 2 and 3 at the Freeport LNG facility started commercial operations. Train 2 is supported by a 20-year purchase agreement with BP, and train three is supported by purchase agreements with Total and SK E&S. Moreover, in September 2020, FERC granted Freeport LNG three additional years to build the train four expansion which is now expected to be completed by 2026. As of 2020, the six operating LNG export facilities in the United States (Sabine Pass, Freeport LNG and Corpus Christi LNG in Texas, Cove Point LNG in Maryland, Cameron LNG in Louisiana, and Elba Island in Georgia) were all expected to add LNG production capacity during the forecast period.

Segmental Analysis

The Global LNG Market is segmented by LNG infrastructure, LNG trade, and region.

Based on LNG infrastructure, the global LNG market is further segmented into LNG liquefaction plants, LNG regasification facilities, and LNG shipping.

The LNG liquefaction plants segment was the largest market during the forecast period. In 2020, 22 countries had a combined liquefaction capacity of about 454 MTPA. In the following years, more liquefaction projects are anticipated to be proposed, supported by rising global demand for LNG, creating various opportunities for market participants. Developing nations switched from using gas to coal-based energy due to mounting pressure from the international community and escalating pollution-related issues. However, many of these nations rely on gas imports from other countries as they are not gas producers. The demand for LNG surged due to the LNG's more remarkable ability to compete in global trade. Due to the increase in new investments, the market is expected to grow during the forecast period.

The LNG shipping segment is the second largest. The LNG shipping includes LNG carriers, which are made to transport LNG under conditions of extreme cold and high pressure. These LNG carriers have three main classifications: fully pressurized, semi-pressurized and refrigerated, and fully refrigerated. The liquefied gas is stored in four or five enormous tanks that are part of the double-hulled structure of the LNG carriers. These tanks are typically made of several layers of material to avoid leaks and keep the LNG at the chilly temperature required to retain it in the liquid state. As part of current efforts to prevent, decrease, and offset greenhouse gas emissions, LNG is primarily used to lower the global carbon footprint. Such factors drive segment growth.

The LNG regasification facilities segment is the third largest. Transferring LNG from a liquid condition to a gaseous form is known as regasification. After the LNG is removed from the tanks and pressurized between 70 and 100 bars until it reaches a temperature greater than 0 degrees Celsius, the process typically calls for seawater and heat exchangers. The LNG industry is anticipated to benefit from this further growth in LNG regasification capacity and rising LNG demand from nations moving toward greener energy sources during the forecast period.

Based on LNG trade, the global LNG market is bifurcated into import and export. Trade in LNG is robust, diversified, and international. The top spot and short-term LNG exporter is still the United States. The lower global economic activity caused the demand for natural gas and LNG to decline, which resulted in lower spot LNG prices for most of 2020, encouraging spot and short-term purchases in many nations.

Furthermore, according to predictions made by Shell LNG outlook, worldwide LNG consumption will reach 700 million tonnes by 2040 as natural gas demand continues to rise significantly in Asia and gains momentum in hard-to-electrify sectors. Thus, it is anticipated that the global LNG trade will grow much more in the years to come.

Recent Developments

• June 2022- Chiyoda Corporation announced their newly developed “O&M Mother” service as part of their EFEXIS. This would help to visualize the plant's status and provide real-time advanced diagnosis/analysis technology to support the operation, maintenance, and integrity of the plant.
• March 2022- Tellurian Inc. announced that it had issued a limited notice to proceed to Bechtel Energy Inc. under its executed Engineering, Procurement, and Construction (EPC) contract to begin construction of phase one of the Driftwood LNG terminal export facility.
• March 2022- Fluor Corporation announced that its joint venture team Green Line Extension Constructors, comprised of Fluor, Balfour Beatty Infrastructure, Inc., Herzog Contracting Group, and The Middlesex Corp., has completed the construction of the Union Square Branch of the Green Line Extension light rail project for the Massachusetts Bay Transportation Authority (MBTA).
• February 2022- Finnish sugar company Sucros Oy, part of Nordzucker AG, has decided to switch from using heavy fuel oil and coal to using liquefied natural gas (LNG) and liquefied biogas (LBG) supplied by Gasum in its existing three boilers to reduce emissions of the sugar beet factory in Säkylä significantly.
• June 2022- CMA CGM and ENGIE partnered to co-invest in the Salamander project to produce second-generation biomethane.
• January 2022- Gazprom Neft and Shell have agreed to expand their JV Salym Petroleum Development. The company’s portfolio of assets will include a license for the right to geological survey, exploration, and production of conventional hydrocarbon reserves of the Salymsky 2 block in the Khanty Mansiisk Autonomous Region.