LNG market entry is hard. Here's why.
You are a downstream state-owned company that has been in business for a long time. You have a strong brand and good reputation in your country. You have excellent creditworthiness. You have a licence to import LNG. You have a terminal access certificate to a major LNG receiving terminal.
Objectively, you are an excellent potential buyer. So why is it so difficult to be taken seriously by established Suppliers and Traders?
I'd like to offer some possible reasons:
1. Brand Recognition A reputable state owned or private company may simply have low brand recognition outside of its home country. For example, at the time of writing, the majority of Suppliers and Traders see CNOOC, CNPC and Sinopec as Tier 1 Chinese Buyers, and all others as Tier 2 (100% private, state owned downstream companies, state/private JVs). This is of course a vast oversimplification.
2. Relevant Commercial and Operational experience
LNG is a commodity that is constantly being lost as vapour while at sea. Therefore there is a time sensitivity to every cargo. What this means to a Seller, is that a cargo MUST be able to be discharged as scheduled. Any failure or delay in delivering/discharging a cargo means cargo value is being lost each day (as "boil off"). A cargo that fails to discharge will be treated by the market as a distressed cargo. The Seller May look to sell it quickly and potentially at an economic loss. Thus, an operationally inexperienced Buyer represents a high degree of counter-party risk for a Seller.
3. Proven Terminal Access Possessing a terminal access certificate versus having practically demonstrated terminal influence again and again are two very different things. The market needs to see over time that you have strong relationships and influence in the country of discharge and at the receiving terminal.
4. Market Approach
The LNG industry has developed to have norms of commercial behaviour. It is like a specific language. If you can't speak commercial LNG, it makes your approach appear clumsy and not serious. Unfortunately, you only get one chance to make a good impression and the LNG industry has a long memory of failed attempts. When your company does not have strong brand recognition, this can result in approaches to Suppliers being ignored.
Successful new market entrants successfully procure their first cargo by using the reputations and relationships of experienced commercial advisors. The advisory firm assisting you MUST HAVE:
1. An extensive global network with Suppliers and Traders
2. A team with practical operational experience negotiating LNG purchases
3. A team with experience in marine and shipping operations
4. A successful track record of procuring LNG for new market entrants
5. The ability to explain commercial risks in an way you understand
With more than 100 years combined experience, Equity Lifting Solutions has successfully helped Buyers enter the international LNG market. Our team has strong relationships with Suppliers and Traders. We have successfully facilitated LNG procurement for vetted new market entrant Buyers and guided them through all stages of the LNG procurement process.
For more information on successful market entry strategies, please contact: Ken Chan, Managing Partner, Equity Lifting Solutions Pty Ltd ken.chan@equityliftingsolutions.com +61405990999
