Sales and marketing of LNG is evolving. Are you prepared?

Abstract

Australia is in the process of transitioning from the project build phase to the project operating phase in the LNG lifecycle. By 2020, the number of operating LNG trains will grow from nine to 21, and it is expected Australia will challenge to be the world’s largest exporter of LNG. LNG sales and marketing activity is expected to increase dramatically across the Asia-Pacific region. But what does this change mean for LNG players in the Asia-Pacific region? And what needs to be done to prepare for it? There is presently very little information available on how prepared LNG companies in the Asia-Pacific region are to undergo this transition. Equally, the maturity of the risk management and trading functions of the more established companies in the sector, and how much work less-experienced companies need to do to meet global standards, has been relatively opaque. To bridge this information gap, Deloitte conducted a targeted global survey of LNG participants, particularly focusing on their energy trading risk management (ETRM) maturity. Deloitte also sought the industry’s views on the changing market, and challenges and opportunities for the future. The results show the following: There is a significant divide between established global integrated multi-energy commodity companies and regional Asia-Pacific LNG companies in terms of their ETRM maturity. Organisations with existing marketing and trading functions covering commodities with more mature markets have been able to leverage past lessons and existing ETRM capability across their portfolios. For other companies without this experience in mature markets, the evolving developments and liquidity of global LNG markets presents both significant threat and opportunity. The transition in LNG markets, and the increase in sales and marketing activity, will place high demands on existing and new operations—and their owners—to establish and mature their marketing and trading functions. An ETRM framework is a crucial part of meeting these demands. In this paper the authors examine the background to this transition, what the essential components of an ETRM are, and how far away Asia-Pacific LNG players are from being prepared for transition and achieving maturity in this area.