Sisters Are Doin' It For Themselves - Short-Side Portfolio Players Seek to Turn the Tables on LNG Trade

RBN Energy Blogcast

LNG commerce is composed of two primary models. One is the traditional point-to-point model, on which the industry was founded and still accounts for more than 60% of LNG trade. More recently, the portfolio model has emerged, pursued by upstream oil and gas majors, that would allow them to monetize their gas reserves by converting them to LNG and shipping the product worldwide in vessels under their control — an attractive strategy that also would allow them to increase their exposure in the LNG market to take advantage of international arbitrage opportunities. As such, they are always long in LNG and in the ships required to move it. However, the portfolio model is being infiltrated by a buyer community looking to become short-side portfolio players and increasingly committing to long-term offtake agreements or FOB sales, then shipping LNG not only to meet their domestic market needs but to take advantage of regional pricing differentials. In today’s RBN blog, we look at the rise of the short-side portfolio player model and ask who might prevail in a potential clash of titans over market share and dominance.