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3 Reasons Why Oil and Gas Companies Should Embrace Liquified Natural Gas

The oil and gas industry is in the doldrums , and it does not look like changing anytime soon.

As the oil and gas industry muddles along, there might be an area where the oil and gas companies’ expertise can be put to good use. In article from International Enterprise (IE) Singapore, Chairman Seah Moon Ming spoke about the potential in the liquified natural gas [LNG] space:

“For Singapore companies serving the oil and gas sector today, LNG is an adjacent business,”

“Know-how can be adapted to meet project-based requirements related to both conventional and small scale LNG infrastructure, transportation and distribution. Singapore companies are also well-positioned to innovate solutions that can meet global standards.”  

IE Singapore listed three reasons why LNG could be worthwhile:

1. IE Singapore expects LNG demand to grow over the long term from population growth and urbanisation.

2. The transition could lead to cleaner fuels. IE Singapore said that natural gas emits 50% less carbon dioxide compared to coal and 20% less compared to fuel oil.

3. Elsewhere, BP Energy Outlook is projecting that natural gas could account for as much as 30% of the world’s energy mix by 2035.

Major firms have taken notice. Wong Weng Sun, SembCorp Marine Ltd ’s (SGX: S51) chief executive officer said this during its latest earnings briefing:

“Rising global demand for gas also augers well for our broad-based LNG solutions and capabilities. We believe these are the key segments that will offer opportunities in 2017.”   

SembCorp Marine took a 56% stake in Gravifloat in 2016. Gravifloat offers near-shore LNG terminal solutions. Keppel Corporation Limited ’s (SGX: BN4) is also looking to move beyond its oil and gas industry. In Its latest earnings, Keppel Corporation chief Loh Chin Hua said:

“Keppel is also well positioned to address growing requirements across the LNG value chain. In addition, we are exploring ways to re-purpose the technology that we developed in the offshore industry for other uses.”   

It remains to be seen how much LNG can replace existing revenues at the two oil majors. This is worth keeping an eye on for 2017.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.