The US gas market is in a state of dramatic change. US gas demand is expected to increase by 13% - up to 2010, from 26 Tcf today - to reach 31 Tcf by 2025 (EIA forecasts). This increase is driven by the demand from the gas-fired power generation.
Some analysts believe US imports of LNG will grow from around 13 million tons this year (2005) to 58 million tons by 2015. However, long-term success in this attractive market will be subject to considerable challenges:
1. The US gas market is characterized by instability and volatility. This will be increasingly tough to manage.
2. We believe that the second challenge concerns the development of the LNG regasification infrastructure in the United States. The nation had four regasification terminals receiving around 650 Bcf of LNG in 2004. The fundamental challenge, in our view, seems to be in long cycles and mismatches of development of infrastructure for both regasification and liquefaction.
• In the United States the NIMBY (not in my back yard) reaction to requests for permits to build regas terminals is still prevalent.
• The development cycle for regasification seems to be in the range of 3 to 5 years, whereby for liquefaction it takes 5 to 10 years, causing project cycle time mismatches and potential constraints in the value chain.
3. The third challenge concerns the increasingly global nature of the LNG market. Just as LNG is starting to play an increasing role in the United States, European and Asian demand for LNG is also on the rise.
Accenture has identified three types of companies working in the United States that will be able to meet those three challenges.
• The first group is what we call the "push" players - typically the larger oil companies currently supplying the US market from their upstream gas, but not pursuing wide-scale gas trading activities. Their future LNG play will be driven by a large gas supply base like Qatar for ExxonMobil or Shtokman field for Gazprom.
• The second group is the "pull" group - companies like BP and Shell, which traditionally market more than they produce in the United States, and Sempra, which markets high volumes of gas but produces next to nothing. This group has strong knowledge of the US market and also has trading and risk management capabilities.
• The third group we have termed "early movers" - companies like Tractebel or British Gas, which have made an early bet on building LNG terminals and infrastructure.
What exactly will those companies need to do to be successful?
• For the "push" players, market segmentation and analysis skills to identify the most attractive segments/customers. They will, in our opinion, be more exposed to the boom/bust cycle.
• For the "pull" players, intelligence to capture any arbitrage value between markets.
• The "early movers" will need to identify bottlenecks in the LNG supply chain and take positions that will exploit scarcity value until the constraints are remedied.

Alexander Landia is the global gas partner for Accenture, Paul Equale is a partner in Accenture's Energy industry group, and Julie Adams is senior manager with Accenture Research (Energy) in London.

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