Industry Trend Analysis - JV To Target Emerging Market Demand - SEPT 2017


BMI View: The JV agreement between Qatar Gas Transport Company and Hoegh LNG reaffirms our view that FSRU capacity is set to grow strongly over the next decade. The opening of new m arkets , in Asia and Latin America in particular, will be key drivers of future incremental LNG demand whilst also supporting the FSRU owners ' market.

Qatar Gas Transport Company and Norwegian shipping business H o egh LNG have agreed on a joint venture (JV) to target the opening of new markets for Qatar to sell its LNG via floating import terminals. Strategically, the JV between Qatar and Hoegh is a positive move for both parties, with the former targeting new demand centres from emerging LNG markets across the globe, and the latter set to benefit from a closer relationship with an LNG producer and distributor, one that may prove attractive to potential new buyers and boost floating, storage and re-gasification unit (FSRU) orders.

We expect a continued build-out in capacity amongst emerging markets (EMs) over the next decade (see ' FSRU Capacity Set For Strong Growth ' , June 13) . A key component of medium-term LNG demand will stem from the addition of flexible, floating import solutions in smaller emerging markets. The flexibility, speed and relative cost-savings of bringing floating import capacity online compared to larger onshore import projects will ensure growth in global FSRU capacity, particularly as LNG spot prices face downside pressure over the next few years ( see ' Singapore SLInG: Low Prices Driving Rapid Demand Growth ' , 27 June). In total, we expect 46.3mtpa of additional floating import capacity to be brought online globally by 2020, with substantial upside risk to this volume from other proposed projects.

FSRU Demand Continuing To Grow
New Cumulative Global Floating Import Capacity, mtpa
f = BMI forecast. Source: BMI LNG Key Projects Database

Both Qatar and Hoegh have expressed aspirations to target emerging markets in both South-east Asia and South America. Asian and south-east Asian emerging markets in particular will be key growth markets for LNG demand over our ten-year forecast period.

Asian Demand To Maintain Global Importance
Regional LNG Demand 2016 to 2021, bcm
f = BMI forecast, Source: BMI Research

Emerging Asian markets, such as Pakistan and India as well as Vietnam and the Philippines, are particularly well suited for FSRU concepts, with floating import projects increasingly important in markets constrained by power shortages (see 'Floating LNG-To-Power As A Market Enabler', January 20), as well as geographical constraints. Within these markets, electricity demand will be a key driver of LNG demand growth and LNG's integration with power will be a key trend going forward.

Hoegh/Qatar To Focus On LatAm, Asian Markets
Floating Import Capacity Under Development, mtpa
Source: BMI LNG Key Projects Database, IGU, GIIGNL

The FSRU owners' market remains concentrated between three large players Hoegh LNG, Golar LNG, and Excelerate Energy. However, a number of new entrants are emerging, such as BW Gas and Mitsui OSK. As new markets begin to open, and lower LNG prices stimulate demand, we expect to see further new market entrants into the FSRU space. The move by Hoegh to partner with the world's leading supplier of LNG also stands to help differentiate the company from its competitors, somewhat de-risking supply issues through a direct working relationship with Qatar.