28 Outlook for Liquefied Natural Gas Industry Increased Credit Costs May Deter New Market Entrants. The growth of US LNG projects and shorter-term, spot market transactions have brought new players into the LNG industry, which has historically been comprised of a small “club” of participants. But the recent spike in LNG prices could, paradoxically, push new entrants out or make it harder for them to enter the market. A cargo of LNG valued at US$100 million or less just a few years ago can now be worth US$200 million or more, and that jump in valuation means more onerous credit requirements for buyers. In the spot market, buyers often need to secure a standby letter of credit for 100% or more of the cargo value. Creditworthiness is also paramount for any buyer in the long-term market, and buyers without investment-grade credit ratings are facing even more stringent requirements. These requirements have the potential to reinforce historical barriers to entry, deterring or even preventing new players from participating in the LNG industry. High Prices May Delay LNG Conversions Outside of Europe. As exporters divert LNG cargos to Europe, where prices are highest, buyers elsewhere are having a hard time securing spot cargos. That may slow the development of LNG infrastructure elsewhere. Potential buyers, who would have otherwise contemplated making the fuel switch to LNG for power generation, may rethink that strategy if they cannot secure LNG cargos. And sponsors of LNG import terminals may have to shelve or scrap their plans, as European countries have secured all available floating storage and regasification units (FSRUs) necessary to implement the fuel switching. FSRU Availability and Requirements as of August 2022 Laid up Contract ending Operating as LNG carrier On order or in conversion 0 5 10 15 20 25 30 FSRU availability Europe–firm FSRU Europe–no firm FSRU Rest of the world– firm FSRU FSRU commitments (excl. South and Southeast Asia) Under construction–firm FSRU Under construction–no firm FSRU Planned–no firm FSRU South and Southeast Asia FSRU projects Number of vessels Source: “Gas Market Report, Q4-2022 including Global Gas Security Review 2022.” International Energy Agency, Gas, Q4. Note: Status as of August 31, 2022.