Though the LNG markets are in a current state of flux, with a slowing global economy reducing overall energy consumption and low crude prices putting downward pressure on liquefied gas prices, there is little question that in the long run, LNG trading will be a vital and growing market. With the growing geopolitical instability in Eastern Europe that has made Russian gas supplies unreliable, the mandated retirements of nuclear and coal-fired generation around the globe, and an abundant and growing supply of natural gas from shale deposits, most indications are that demand for LNG will increase with a global economic recovery and the market will see strong mid and long-term growth despite its near-term troubles.
However, as we pointed out in a ComTechAlert article a couple of months ago, the lack of strong growth in the spot LNG markets over the last few years has limited the number of software companies that have made significant investment in developing the particular capabilities that are required by LNG producers, shippers, and traders. Without the assurance of a pool of ready buyers, greenfield development of technology for a small but growing market like LNG can be difficult for software companies.
ComTech was recently invited to a briefing by OpenLink to get overview of their offerings for the LNG market. Like most vendors, they do see upside in LNG; however, unlike most, they have been able to leverage their global reach, and a group of existing customers currently active in the LNG space, to make the necessary investments to build-out the specific capabilities required by LNG producers, buyers and trading shops.
With around a half dozen customers utilizing their Endur product for some portion of the LNG value chain, from gas supply, liquefaction, shipping, regas, and trading, that product has become a fairly comprehensive solution for global scale trading shops that trade LNG as a component of a larger portfolio of energy commodities. However, with a limited number of LNG suppliers and global scale traders, most of the market activity and focus remains on the LNG buyers’ side, particularly the Asian utility and industrial markets which consume about 70% of the global supply. In acknowledging the needs of this market segment, OpenLink has recently deployed a more targeted and packaged solution, called Endur LNG Xpress.
OpenLink describes Endur LNG Xpress as “a standard, out-of-the-box solution and implementation, inclusive of interfaces, standardized process, and standard content.” The product, again designed to appeal to and address the needs of LNG buyers – primarily small to mid-sized utilities and LNG traders – provides coverage for physical LNG contracts, voyage planning, settlements and some risk and credit capabilities. In addition, OpenLink provides preconfigured interfaces to the most common shipping solutions, including Veson, for managing LNG vessels and their cargos at sea.
According to OpenLink, given the pre-configuration of standardized content, and a market-specific functional footprint defined in collaboration with their existing LNG customers, Endur LNG Xpress can be implemented in less than six months and at a significantly lower cost than the larger scale, multi-commodity products that would otherwise be overkill (and probably over-priced) for mid-tier and smaller LNG buyers.
Though the current uptake of CTRM technology for LNG has been somewhat slow, we do anticipate that market will show good growth over the next couple of years. Based upon the information they shared with us during the briefing, and with the investments they’ve made, OpenLink seems be well-positioned to address the needs of the of most software buyers who trade in LNG, from the large global players considering Endur to manage LNG deals as a component of a large multi-commodity portfolio, to the small and mid-size LNG buyers looking at Endur LNG Xpress as a solution that fits their particular needs, and at a price point they can afford.