Foot on the Gas: Competition Among the LNG Majors18 June 2009
LNG regasifaction and liquefaction is a costly business with many barriers to entry. A new report from GlobalData looks at the top ten LNG companies, revealing why their business strategies are leading to success.
As the economic downturn shows signs of easing, the world's degasification and liquefaction capabilities are likely to be once again stretched to the limit. A new report by GlobalData Global Top Ten LNG Companies: Detailed Analysis and Forecasts of All Active and Planned LNG Terminals To 2012 reveals today's major LNG companies and how the playing field may change in the coming years.
The top ten firms have equity stakes in 61 terminals around the world, with Korea Gas Corporation leading the way on regasification capacity with nearly 3,500 billion cubic feet (bcf) as of 2007. In addition, the Tokyo Electric Power Company, Enagas and Chubu Electric Power Company each have capacity of more than 1,000bcf.
Korea Gas explores, imports and exports natural gas for domestic and overseas markets. The company operates three terminals; the Pyeongtaek terminal, the Incheon terminal and the Tongyeong terminal, which covers an area of 2,520km and has a total capacity of 20 100,000kl storage tanks alongside nine 14,000kl units and six mammoth 200,000kl tanks.
The company’s international assets include PNG development projects in Russia, Qatar Ras Laffan, Yemen and East Timor, among others. It is also conducting a major construction project to connect pipelines from the Kovytinkskye gas field in northern Irkutsk to supply natural gas to China and Korea.
In 2001, Korea Gas established the International Projects Group to expand this overseas segment of the business as well as to capitalise and commercialise on the technologies it has accumulated in the areas of construction and operation of natural gas facilities.
One key business diversification has been its entry into the LNG tanker business and it has also diversified into recycled waste resources such as rubber and cooling energy, a by-product of LNG generation.
In total, the company accounts for 15.3% of the total regasification capacity and 0.4% of the liquefaction capacity. Korea Gas continues to maintain a diverse source of gas suppliers to minimise potential supply glitches and plans to establish further contracts in Malaysia, Russia and Yemen.
For Korea Gas, its major competitors stand in the form of Tokyo Electric, Enagas and Chubi Electric. As its name suggests, Tokyo Electric is principally engaged in the production of electricity and to fulfil this ambition has 17 nuclear reactors to provide a large sector of Japan with its power. But it also comes in second in the world league of regasification capabilities, with 1,495bcf.
Tokyo Electric operates in five principal business segments: electricity, information and communications, energy environmental, living environment and overseas business. It has accumulated considerable R&D expertise at every stage of its business, from electric power generation to sales. But between the end of 2006 and the first quarter of 2007, the company’s name was brought into disrepute with a number of problems at its power plants. The incidents included data tampering and falsification as well as deficiencies in statutory procedures.
Its new business development efforts are largely centred on two fields that are peripheral to its principal domestic business, namely energy and the environment and its overseas business. Its environmental focus is most clearly symbolised by its Switch! campaign, which encourages the Japanese to convert to all-electric homes.
The company is focusing on fuel as it is one of the world’s largest purchasers of LNG. By engaging throughout the entire LNG value chain, the company hopes to enhance its ability to procure and respond to changes in supply and demand for LNG. However, by using LNG as feedstock for its power plants – alongside uranium, crude oil and coal – it will have to do battle with the long-term raw energy prices set to characterise the market. Furthermore, the company is not planning to build any more LNG terminals in Japan until at least 2012.
Hot on Tokyo Electric’s heels is Enagas whose primary business is the transportation, degasification and storage of natural gas. Its facilities include more than 7,600km of high-pressure gas pipeline and four regasification projects in Barcelona, Cartagena, El Musel and Huelva. With revenues of €829.30m and total capacity of 1,299bcf, Enagas is increasingly proving its worth.
Tokyo Electric and Korea Gas also have big competition closer to home. Japanese-based Chuba Electric is engaged in the generation of electric power and has a regasification capacity of 1,256bcf. The company has developed its operations as a multi-services group providing electricity, gas and on-site energy as well as IT and telecommunications services for the construction and maintenance of electric-related facilities. This clever ‘one-shop-fits-all’ strategy has led to the company garnering great success and today it employees more than 16,000 staff.
Rest of the pack
The remainder of the top ten league consists of Sonatrach, Royal Dutch Shell, Osaka Gas Company, Qatar Petroleum, Tokyo Gas and Petroliam Nasional Berhad. Each has their individual business models and individually they are successful in their own fields.
State-owned Sonatrach, for example, is the oil and gas producer and refiner of Algeria. It operates over 100 plants and facilities as well as 16,000km of pipelines. Having traditionally marketed its products in Western Europe and the US, it is now focused on establishing a presence in Central Europe and Asia.
Meanwhile, Shell’s global presence (and its 100,000-strong workforce) speaks for itself. It has regasification capacity of 416bcf and although like other oil majors it has not been unaffected by the recent oil price crash, it stands in good stead to build on previous successes. The company is acting on the principal that demand for natural gas will outgrow demand for oil and as such it is building on its leading LNG position with strong elements in the value chain.
Tokyo Gas, which is involved with gas distribution and sale, will need to sustain and expand gas sales while Petroliam Nasional Berhad is focused on improving operational efficiency. Qatar Petroleum, a late entrant to the market, is also building on strong foundations.
Over the coming months each of these player will need to stay on its guard and remain business savvy if they are to capitalise on their position and make the most of the economic turnaround and resulting demand in uptake. Putting in the time and money to evaluate their business models and streamlining where possible will be resources well spent going forward.
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