LNG Needs Depth, Not Just Breadth

January 27, 2020

Over the past decade, the market for liquefied natural gas (LNG) has expanded dramatically: over 20 countries started to import LNG after 2008, opening far and wide a market hitherto limited to a small number of big importers. This expansion has been supercharged by floating storage and regasification units (FSRUs), which simplified the process for a country to become an importer—a story well told in the news, research reports, and company presentations.
 
But there is another side to this story. Many countries join the LNG market, but most stop at a relatively small import volume, and some reduce their imports over time. Only a few markets keep growing, and fewer still become large markets. Consider the graph below, which shows LNG imports into countries that joined the market after 2008 (through 2015 since more recent importers do not have enough data points to establish a trend).
 
There are certainly a few markets that register sharp growth: Pakistan and Thailand stand out and, less so, Singapore, Poland, and the Netherlands (which is a bit of an outlier having seen just a one-year jump in 2018). But it is just as common to find markets that reach a certain level and mostly stay there—Kuwait, Chile, Jordan, Malaysia, and Israel look like they fall in this category (one can always read the data differently). And there is another batch of countries where imports in 2018 were far below their peak: Argentina, Egypt, Brazil, UAE, Lithuania, and Canada.
 
Each country has a story, of course; in some countries, domestic production or pipeline imports replaced LNG (e.g., Argentina, Canada, and Egypt). In others, LNG is a backup that adjusts up and down based on needs (e.g., Brazil and Israel). Others import about as much as they need and may never become large markets (e.g., Lithuania). Others import mostly seasonally, and their plateau might signify infrastructure constraints (e.g., Kuwait).
 
The point here is that the LNG market has been remarkably successful in reaching new markets, but it has a harder time converting these markets into big consumers. Just as often, countries hit a plateau and stay there, or they might even turn to alternatives that reduce their LNG needs. Counting how many markets import LNG is not enough. It is just as vital to chronicle what happens to these markets over time.