“The new market regime is causing seismic shifts in LNG portfolio value”

“The new market regime is causing seismic shifts in LNG portfolio value”

Meet the Timera team: ‘Regime change’ LNG webinar

Our feature content this week is video based for the first time. You can meet some of the Timera LNG team members in a recording of our recent ‘Regime change’ LNG webinar.

Click here for the ‘Regime change’ slide pack from the webinar.

Click here to watch the ‘Regime change’ webinar video recording.

Table 1 provides a ‘key takeaway’ summary to webinar coverage of the LNG market impact of Europe’s pivot from Russian gas to LNG.

1. Europe driving marketEurope aggressively competing with Asia for constrained supply until at least 2025Global prices set to remain elevated 2022-25
2. Flex inhibitedHigh prices & policy mandates acting to materially inhibit European flex provision
Demand response replaces European flex as key driver of marginal prices
3.Price volatilityReduced market flexibility & major collateral/liquidity constraints
Structurally higher price volatility & shifting correlations
4. Tight market 2022-25New regas capacity but limited new supply
New regime market conditions drive value & risk; liquidity & collateral challenges remain
5. Risks increase 2025+Demand uncertainty & supply response increase uncertainty 2025+ (further regime change?)
Portfolio construction & contracting strategies key for value creation & risk management

Table 2 covers key takeaways on the LNG portfolio impact of market regime change.

1. Game changer
- New market regime causing seismic shifts in LNG portfolio value… creating opportunities & risks
2. Portfolio construction- Market transition in 2022 is triggering major strategic reviews across LNG companies
- Conditions rich with opportunities to deploy capital, invest in assets and aggregate portfolios
- As important as capturing value from the current regime is being prepared for the next one (e.g. Chinese SPA activity)
3. Value management- High prices & volatility drive importance of dynamic management of interdependent exposures
- Within portfolio value capture key (high margins vs poor liquidity); large incumbent advantage
- Price signals driving relative values of flex (e.g. towards diversion flex, away from US cancellations)
4. Prompt optimisation- Higher proportion of value monetised via optimisation within year (+ liquidity / logistical constraints)
5. Risk management- New regime = step change in portfolio risk; credit/collateral issues require active management
- Capabilities drive advantage (e.g. team, analytics, systems, data)