Historically the major commercial challenges in the LNG business have been at the 'market' rather than the 'upstream supply' end of the value chain. In the early years of the industry, securing foundation customers for projects was a key challenge and, in the last two to three years, the difficulties associated with the permitting and approval of regas terminals, particularly in North America, have been seen as a significant obstacle for the major players in the LNG business. However, with the demand for LNG forecast to treble over the next 15 years and the growing presence of the major resource holding National Oil & Gas Companies (NOGCs) in the LNG business, the next big challenge for the major International Oil Companies (IOCs) will be to secure access to upstream gas reserves to feed the next generation of LNG supply projects. The LNG supply landscape is becoming increasingly complex. There are moratoria on new LNG projects in key producing countries such as Egypt and Qatar, continuing problems with gas supplies from Indonesia and the emergence of new players such as Gazprom. IOCs in the LNG business now face a tough choice - participate in the development of proven gas reserves belonging to the NOGCs or explore for gas to support new LNG projects themselves. Working with the NOGCs is a relatively safe strategy but competition is intense and returns are coming under increasing pressure, while exploration offers potentially greater returns but comes with significant risks. This paper will examine the upstream LNG supply landscape and the positioning and strategies of the key players therein as they look to secure access to gas reserves. The paper will also consider the potential implications that access to upstream gas reserves has for the balance of power between the NOGCs and IOCs and for the sustainability of growth in the industry itself.
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