Prepping for LNG 18 – what you need to know

In just a few days, the world’s most important liquefied natural gas (LNG) conference – LNG 18 – is coming to Australia.

Here’s my list of the key industry players and what to ask them if you have the opportunity.

LNG producers

The LNG producers in Australia are all paying close attention to domestic market issues, wholesale gas pricing, social license concerns, government changes, competitive inquiries, cost and productivity concerns, and the status of the neighbouring projects.

At this conference, the rest of the big producers will be present and in force, from Qatar, Russia, Malaysia, Algeria, Nigeria. Most of their domestic market concerns are owned by their governments. So I’d like to know how much of their production is spot exposed versus on long contract to get a sense as to the liquidity in the market. I’m interested in their views on how the Panama Canal expansion might change their outlook on markets, as this influences key trade flows. And of course, what capital projects they are planning and when might those get sanctioned.

For LNG buyers

The LNG buying group include big power and gas utilities, large industrial groups, governments, and national oil and gas companies. The audience will be keen to hear their outlook on demand, any local market infrastructure developments that suggest demand growth.

Many buyers of LNG don’t have a lot of optionality on their gas buying, but some have the option to substitute fuels depending on pricing. I’m curious about how they make the decision to shift from one fuel to the next and if this drives their LNG buying and contracting behaviour.

I’m interested to learn first-hand as to what they see as their growth trajectory and how gas interplays with other fossil fuels in their market. What plans they are making for the eventual transition off fossil fuels and towards renewables, if any.

They will all have points of view about how the impending arrival of US LNG will change the market dynamics. I’m anxious to hear their views on destination clauses, the delinking of gas from oil pricing, the duration of contracting terms. Finally, I’m puzzled about why they are on the sidelines at the moment and not contracting. I want to know why – and when they’ll likely get back to the market.

For the think tanks

What’s most interesting is learning what this group’s thinking agenda is. They focus on the long-term issues, but which ones? COP21 impacts? New advances in technology? The rise of alternatives to gas? The interplay between pipelines and LNG on continental Asia? Geopolitics?

For suppliers

The most intriguing questions to ask the suppliers to the industry will be on how well they are coping with the downturn, how well is pricing holding up, which projects look most promising to them.

I’m interested in how they see advances in the latest technologies influencing their product offerings.

For the large engineering houses, surely the questions have to be around the number of cost and schedule blowouts, and what changes are likely to be negotiated into the next generation of projects.

For analysts

I’d be keen to ask the financial houses if they see the underlying risk of the industry changing at all, and how are they factoring that risk into their ratings. I wonder what they really think of the Canadian projects, now that the new federal government sports a more green hue than its predecessor. And they will no doubt have a view of the US political situation and the impacts on the likely expansion of the US export sector.

For the deal people

The only question that matters for the dealers is “do you have a customer?” It would seem no deal will happen in this environment without a customer ready to sign up to whatever terms are on offer. At the moment, neither oil indexed nor hybrid pricing contracts appear to satisfy the buyers, and I’m curious to hear from the dealers what they think it will take to get customers to sign up.

For LNG traders

I’m most interested in how the LNG traders see their world evolving, with the arrival of trading hubs in Singapore, Tokyo, and Shanghai, the arrival of the new muscular Japanese buyer JERA, the likelihood the Japanese will become more active in trading activities. I’m curious what innovations on trading might be taking place.

For technical teams

I’m keen to hear from this group what actions they see their employers doing to address the current challenging environment. Are they seeing layoffs? Project delays? Outsourcing and restructuring? Supply chain pressures? This group usually has the best and most realistic handle on what is happening, and the unexpected side effects.

Final thoughts

The conference publishes a list of attendees, so it’s easy enough to see who is coming to Perth, by country and company. Bring plenty of business cards as there are a few thousand attending at last count.

What are the lessons from Australia’s great LNG construction boom?  Pre-register for a copy of a new Deloitte thought leadership on the Australian LNG sector launching soon.

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