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Developing liquidity in the LNG market - Asia's challenges and outlook

Developing liquidity in the LNG market

The LNG market remains an illiquid market, where trading based on long-term contracts with inflexible contractual terms is the mainstream. Market participants are hoping for a transformation of the LNG trading market into a liquid and open market.

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The environment surrounding LNG trading has been undergoing significant changes in the last few years, including the fall in spot LNG prices stemming from the fall in crude oil prices since 2014 and the emergence of new LNG importers and suppliers. Nevertheless, the LNG market remains illiquid, with trading based on long-term contracts with inflexible contractual terms still the dominant market practice.
The purpose of this report is to bring to light the realities of a predawn market. We will first review the reasons for the need to develop an LNG trading market, investigate the situation at the forefront of the market through interviews in Singapore and Japan and highlight the position of the LNG market by comparing it to other commodity markets before reviewing the challenges and outlook for this market and offering market participants a perspective for the future as our conclusion.

Contents

  1. Introduction
  2. Three reasons to develop an LNG trading market
  3. Nascent LNG trading hubs in Asia
  4. Current position of the LNG market as derived from comparisons with other commodity markets
  5. The challenges in developing a liquid LNG market
  6. Conclusion

Writer

Partner, KPMG FAS Co., Ltd.
Tsuneo Miyamoto

Director, KPMG Consulting Co., Ltd.
Naoki Tatsumi
 

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