In the next seven years, the liquefied natural gas (LNG) industry will see more growth than it did during its first 40, but there is enough uncertainty to create challenging decisions ahead, according to research and consulting firm Cambridge Energy Research Associates (CERA). "Huge investments in LNG are under way and irreversible," says Michael Stoppard, CERA senior director, global LNG. "On the upstream supply side, where most of the money is spent, global needs justify major spending increases. Planned LNG supplies are not an overreaction nor an overbuild." Not all LNG projects will make commercial returns, and not all parts of the LNG value chain will create value, he adds. Returns will vary by project and across different parts of the value chain according to relative surpluses and constraints. CERA has arrived at two scenarios to describe alternative paths for the global LNG industry to 2020. The main differences between the scenarios "competitive rim" and "high seas" are the level of economic growth, the state of international relations and assumptions about pipelines, says Stoppard. The competitive-rim scenario includes friendly international relations, free trade, strong economic growth and easy access to capital, fast-track market liberalization, and increasing overall energy demand. These conditions are also favorable to development of major transnational pipeline projects, which sometimes compete directly with LNG. The high-seas scenario includes deteriorating international relations, terrorism fears, a retreat from free trade, poor economic growth and slow market deregulation. LNG will have advantages over pipeline alternatives in terms of flexibility, security and financing, he adds. A small group of players with strong balance sheets will dominate the gas scene. Second-tier players will develop alliances to minimize risk. CERA expects 216% growth in LNG trade through 2020 under the competitive-rim scenario and 150% in the high-seas scenario.

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