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Unlocking growth in the LNG market

As part of the Leaders of the Unexpected commodities trader program featuring the industry’s most inspiring Master Commodity Traders, we speak with Sarah Behbehani, former Senior Vice President of LNG at Jera Global Markets, for her views on the future of the small-mid scale LNG market.

Could you explain why the next exciting opportunity will be in the small-mid scale LNG market?

It’s logical for a commodity like LNG to have sizeable growth in small scale as it evolves and matures. The energy transition is encouraging more players to seek more environmentally friendly fuels.

Many market segments can afford to pay a premium for 5MT or 30MT of LNG, but don’t need 130MT of LNG.

Also, LNG for transport is another area where growth can take off.

Why do you think that currently, the small-mid scale LNG market is a niche industry that flies under the radar of many players?

In the last 10 years, there were economic incentives in the LNG market to keep players away from investing in more complex/niche segments. However, the companies that moved first will benefit from that investment when the LNG bulk/wholesale market margin contracts.

What will drive growth for the small-mid scale LNG market?

The main factors are government initiatives to encourage switching to cleaner fuel.

Growing populations need more gas for cooking and heating. Growth in industrial output also increases demand for electricity and power.

Meanwhile, LNG for transport between terminal and the falling cost of FSRU technology will also impact the mid-scale market. And we will see more countries in emerging markets that will use this technology on a seasonal basis, and as marginal fuel for peak power demand.

On which areas do you think small-scale LNG market will have the most impact on? For example, marine fuel (bunkering), fuel for heavy road transport, power generation in off-grid locations.

Small-scale LNG will impact all of these areas quite rapidly, and will exceed all forecasts and expectations. It was first forecast that small-scale LNG would grow at CAGR of 2-3 percent for 2020-27. However, it the forecast currently stands at 6-8 percent, and I would not be surprised if we saw double-digit growth between 2022-2027.

Asia and undeveloped parts of Latin America are tipped to be the epicenter of exponential growth. Do you agree with this prediction?

Emerging and developing markets with no connectivity to gas grid is a natural market for small and mid-scale LNG. You have the flexibility and agility to reach remote areas in short period of time. LNG is on water pipeline to move gas and small-scale LNG is an extension of that pipeline into more logistically challenged areas that currently rely on coal or liquid fuels.

How should LNG traders prepare so that they are well positioned to tap into the wealth of opportunities?

I don’t believe there is single piece of advice that would be suitable for everyone, apart from to be agile and adaptive to the market.

The LNG market has changed dramatically in the last three years. What was needed to succeed in 2018 is no longer applicable in 2021. You can play/trade in many different ways and each company should adapt their trading plans depending on their risk appetite and long-term strategies.

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