As global LNG markets move fitfully away from long-term, oil-indexed prices to a more liquid and diversified spot market, financial and midstream structural challenges loom large.

“Companies already in the sector are having to move further downstream to capture demand,” said Ira Joseph, head of gas and power at S&P Global Platts at an LNG Roundtable on Jan. 25.

He also noted that just as buyers and sellers of LNG are getting their heads around the dissociation of global oil and gas prices, the market fundamentals are already changing. “What the markets really want to see is LNG priced to coal plus carbon parity,” he said. “That is historically lower than has been viable, and would mean cuts in liquefaction costs and cuts in transportation costs.”

LNG pricing was long indexed to oil, but the reality of import markets is that the competition is now coal in some regions and renewable energy in others.