Economics and geopolitics of natural gas: Pipelines versus LNG

Until recently, most natural gas trade has been limited to the regional scale due to the challenges of transporting gas over long distances. Liquefied Natural Gas (LNG) - an option that reduces the volume of gas about 600 times allowing for transportation by ship - has created an opportunity for expansion of the international market for natural gas. Pipeline option shows cost competitiveness for short to medium distances and for inland destinations, but it suffers from geological and political constraints. LNG provides an option to diversify supplies and we here we assess the LNG prospects for the next decade. The LNG trading volumes are projected to increase from about 240 Mt LNG in 2013 to about 340-360 Mt LNG in 2020. Longer-term projections show a potential for a substantial growth of LNG, but the challenges exist due to a potentially weaker demand from Asia. On the other side, geopolitical tensions might increase LNG flows to Europe.