Market Concentration liquefied natural gas (LNG) in the hands of several powerful energy companies such as Shell and TotalEnergies, led to the launch fuel prices, as this resulted in a correspondingly large increase in the amount of capital required by companies to enter the market. As a result, smaller companies with less capital are in danger of disappearing. According to industry analysts, the situation will not change until 2026, when LNG production and supplies are expected to grow and prices to fall.

According to Jason Fehr, head of energy and transportation consultancy Poten & Partners, Shell and TotalEnergies together control 110 million tons of a total global market of 400 million tons. The two energy giants have acquired the LNG division of BG and Engie and are both partners in the North Field joint venture in Qatar, one of the largest LNG projects. If we add to this the 70 million tons of LNG controlled by Qatar Energy and 30 million tons of BP, it turns out that four large companies actually control more than 50% of the global fuel market. Before the gas crisis, however, the situation was different.

The global LNG market has more than doubled since 2011 as dozens of new companies entered the industry and some smaller Asian companies also developed. The significant growth of these small companies is evidenced by the fact that in recent years they accounted for 20% of Chinese LNG imports. However, the doubling of fuel prices over the past two years has caused tectonic upheavals in the activities of many small companies. The capital needed to bring the company to market has increased dramatically since the price of LNG fell from a record low of $2 per million British thermal units (mm Btu) in 2020 to a record $57 per million Btu last month. Since then, prices have eased slightly to $38 per MMBtu on Monday, but remain high, which industry analysts say reflects the ongoing energy crisis.

The situation will not change until 2026, when LNG production and supplies are expected to rise and prices to fall.

As Tamir Druse, managing director of liquefied natural gas consultancy Capra Energy, notes, “The surge in LNG shipping prices, combined with high market volatility, has put a lot of pressure on those companies that operate on smaller balance sheets.” At the same time, Ben Sutton, managing director of Six One Commodities, a US LNG company, stresses that “the biggest challenge facing all companies in the industry today is how to secure loans.” Notably, the company in question was forced to wind down its operations when fuel prices soared in the third quarter of last year. In short, in a gas crisis, market conditions clearly favor companies with large and diversified portfolios and strong balance sheets, such as major oil majors Shell, BP and TotalEnergies, as well as major trading houses Vitol, Trafigura, Gunvor and Glencore.

Meanwhile, interest rate hikes by major central banks are increasing the cost of fuel trading. However, they do not yet bother large companies, which, on the contrary, benefit. Shell and TotalEnergies reported record profits, and Vitol’s first-quarter 2022 earnings topped what it made in all of last year. Because they have long-term contracts, both companies buy cheap LNG from the US and sell it at higher prices in European markets.