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BP plc (ADR) (BP), BG Group plc (BG): The Future of the Global LNG Trade

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Fueled by growing demand from Asia and the recent spate of natural gas discoveries around the world, the global liquefied natural gas (LNG) trade is gaining more importance by the day, with important implications for several countries’ economies and energy security outlooks.

But according to a recent report by BP plc (ADR) (NYSE:BP), the global LNG trade experienced its first ever annual decline last year. Let’s take a closer look at why it fell and what the future may hold.

BP plc (ADR) (NYSE:BP)

An unusual decline in the global LNG trade
According to the recently released “BP Statistical Review of World Energy 2013” report, the global LNG trade fell 0.9% last year after a continuous 30-year expansion. BG Group plc (LON:BG), the U.K.-based natural gas company, estimates that global trade in LNG last year totaled roughly 239 million tons, down approximately 3 million tons from the previous year’s volumes, according to the Financial Times. This rare decline contrasts with strong expansion in 2009 and 2010, when the global LNG trade grew by 40 million and 19 million tons, respectively.

Interestingly, last year’s drop came despite soaring demand from Japan, as that country continues to import massive quantities of gas to combat the sharp fall-off in domestic energy supplies in the wake of the 2011 Fukushima nuclear disaster. It also comes despite the entrance of new countries into the global LNG trade, such as exporters Peru and Yemen and importers such as India, Kuwait, and Malaysia.

So what explains last year’s unusual decline? Much of it can be attributed to lower energy demand in Europe, as the region continues to struggle with anemic economic growth. According to BP plc (ADR) (NYSE:BP), the European Union saw a 2.3% decrease in natural gas consumption growth, while the Former Soviet Union saw a 2.6% decline. In sharp contrast, consumption growth in the US came in at 4.1%, while China and Japan posted 9.9% and 10.3% increases, respectively.

What’s next for the global LNG trade?
Going forward, however, the rare drop last year is likely to be an anomaly, with the number of countries participating in the global LNG trade set to grow sharply. This year, BG Group plc (LON:BG) forecasts that the global LNG trade will grow by a modest 5.4 million tons, bolstered by exports from Angola — where Chevron Corporation (NYSE:CVX) recently shipped its first cargo from the Angola LNG plant — and new terminals in Australia, as well as an increase in imports from Singapore and Malaysia, and an offshore facility in Israel.

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