Is This the Era of LNG?

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--A comment from the head of Flex LNG (NYSE:FLNG) (Hamilton, Bermuda) on the "knock-out" results for the fourth quarter may be emblematic of emerging evolution in an energy sector marred by geopolitical concerns and transition.

The liquefied natural gas (LNG) shipper said it was largely optimistic about market conditions, adding that tightness in the broader freight market could ease this year on the back of a reprise in newbuilds. Flex LNG itself took delivery of three newbuilds last year and all 13 of the vessels in its fleet are currently on the water.

With the European market struggling under high energy prices and tensions over Russia, a dominant pipeline supplier of natural gas, companies such as Flex LNG are primed for growth.

"We are pleased to deliver knock-out results for the fourth quarter as guided," said Flex Chief Executive Oystein M. Kalleklev.

Fourth quarter revenue came in at $115 million, over its guidance of $110 million and a 40% improvement over third quarter results.

Companies like Flex LNG are capitalizing on the broader trends in the energy sector. Natural gas is seen as a bridge to a cleaner future as some of the low-carbon alternatives have yet to reach commercial operations. And with European importers questioning their own energy security in the face of tensions over Russian involvement in Ukraine, markets are increasingly looking to other suppliers.

LNG, meanwhile, is not vulnerable to the same territorial issues as piped supplies.

Russia has been accused of weaponizing its fossil fuels against Europe by limiting supplies during a period of exceptional demand. The Kremlin countered recently, however, that any pressure on its vast network of pipelines would not only further jeopardize European energy security but Asia's as well.

Emily McClain, a vice president at Norwegian energy consultant Rystad Energy, said Wednesday that European markets are cooling off after Russian President Putin said his forces were pulling away from the Ukrainian border.

"The news is not all rosy, though, as upside risk and volatility are likely to persist over the short term as the future of the conflict remains shrouded in uncertainty," she wrote.

For the European market, the resultant demand for imported LNG is "robust."

While Flex LNG is not in the liquefaction business, it is situated at the forefront of emerging market trends. The U.S. Energy Information Administration (EIA) said in its monthly market report for February that it expected U.S.-sourced LNG exports will average 11.3 billion cubic feet per day for the year, a 16% increase from 2021 levels if the forecast proves accurate. And fairly soon, the U.S. will surpass Australia and Qatar to become the world leader in LNG capacity.

The EIA added that low natural gas inventories in the European market is an incentive to put more LNG on the water, and the quarterly results from shipper Flex LNG are indicative of the broader market trends.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.

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