Natural Gas Procurement Intelligence Report, 2024 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)Report

Natural Gas Procurement Intelligence Report, 2024 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

  • Published Date: Apr, 2024
  • Base Year for Estimate: 2023
  • Report ID: GVR-P-10585
  • Format: Electronic (PDF)
  • Historical Data: 2021 - 2022
  • Number of Pages: 60

The pricing and cost analysis helps in deriving and forecasting the actual cost of products or services over the forecast period. It considers all the cost components and provides a competitive edge during supplier negotiations. Moreover, the outcome helps procurement leaders understand detailed and fact-based cost drivers for the category.

In this Natural Gas procurement intelligence report, we have estimated the key cost components associated with the commodity’s production. The key cost components are extraction and equipment, facilities and storage, transportation and distribution, labor, and overheads. Other costs are depreciation, insurance, tax, etc. Methane is the largest compound in natural gas predominantly, followed by other compounds in smaller amounts such as nitrogen, helium, water vapor, CO2, butane, and alkanes. The majority of extractions occur in reserves located near solid or liquid hydrocarbon beds, such as coal or crude oil deposits. Fluctuations in prices of crude oil and coal can have a major impact on the cost of production and thereby the resulting market prices.

As per EIA January 2024 estimates, prices for Brent crude oil are expected to be around USD 82 per barrel in 2024. There is going to be a slight decline in oil prices as a result of ample supply in 2024. On 26 February 2024, Brent crude oil reached USD 81.72 per barrel compared to USD 77.5 for WTI oil according to Statista reports. At the end of February 2024, global crude oil prices are on a decreasing trend amid continued demand concerns. This was mainly due to geopolitical tensions in West Asia and a strike on a Russian export terminal. The incident in January 2024 also forced the Russian company, Novatek to suspend its operations at the Baltic Sea.

For natural gas, EIA projects that in 2024, the Henry Hub natural gas spot price will remain at elevated levels compared to 2023. The natural gas production growth (domestic supply) exceeded the growth in commodity demand (which included both exports and domestic consumption) in 2022 and 2023. In 2024, however, the situation is anticipated to reverse with demand outpacing supply. The demand will increase by 2.3 billion cubic feet per day and supply will likely remain sluggish. Gas prices are at much lower levels in 2024 than in 2022. In January 2024, Platts' benchmark JKM price for delivery into Northeast Asia reached around USD 9.54/MMBtu. 

Every organization and its procurement team look forward to negotiating the best deal while procuring a set of products or subscribing to services. Rate benchmarking involves price/cost comparison of more than one set of products/services to analyze the most efficient combination that can potentially help the procurement team in getting the optimum rate.

The geographical location, supply chain complexities, transportation and labor, and scale of business play a vital factor in analyzing the rate benchmarking of the Natural Gas industry. The cost of transportation and labor vary across developed and developing countries. In 2022 road freight transportation rates increased by 13% in the European region. However, in 2023 road freight rates decreased in Q3 and Q4 2023 on account of slowing economic conditions throughout the region. In the fourth quarter of 2023, the “European Road Freight Spot Rate Benchmark Index” reached 123.8. It is expected that freight rates will remain low in 2024 due to low demand. However, the introduction of new tolls on top of the already high-cost base will increase rates in H1 2024. As a result, contract rates are likely to remain stable and the growth of spot rates is expected to slow down. In the U.S., on the other hand, the freight rates in 2023 averaged around USD 1.80 to 2.50 per mile. Factors such as rising inflation and fuel rates have further pushed up road freight rates in Q4 2023.

Similarly, in terms of labor, refinery managers in oil and gas industries from India earn around USD 20,000 - 35,000 annually. In the U.S., the average annual pay for the same positions is between USD 80,000 - 10,0000 each year. In developed countries, employees generally earn significantly higher salaries when compared to their counterparts in developing countries. The income gap between the two is typically four to six times higher, which can have a considerable impact on the costs of production or operations for companies.

To gain a comprehensive understanding of other aspects of rate benchmarking, please subscribe to our services and get access to the complete report.

Labor cost is one of the key components of the total incurred costs while offering a product or service. Therefore, an organization must decide on whether the focus category should be retained in-house or outsourced if the organization is providing its products or services at competitive prices. If the organization decides in favor of outsourcing, it must understand the difference in the salary structures of suppliers before selecting a supplier and formulating a negotiation strategy.

According to our research, chemical engineers at Chevron Corporation and BP p.l.c. receive a 25 - 30% higher base salary compared to the salary received by chemical engineers working in companies such as ExxonMobil Corporation and TotalEnergies SE. However, the year-on-year increment rate in all these companies majorly depends on the Key Result Areas (KRAs).

Organizations may find it cumbersome to track all the latest developments in their supplier landscape continuously. Outsourcing the activities related to gathering intelligence allows organizations to focus on their core offerings. At this juncture, our newsletter service can help organizations stay updated with the latest developments and innovations and subsequently assist in preventing disruptions in the supply chain. We have identified the following developments within the Natural Gas industry in the last year:

  • In February 2024, a purchase and sale contract was signed between TotalEnergies and Singapore-based Sembcorp Fuels. As part of the agreement, the former will be responsible for supplying 0.8 million tons of LNG each year for a period of 16 years to Sembcorp. The deal is slated to begin in 2027.

  • In November 2023, Sinopec and Qatar Energy joined forces to sign an integrated cooperation contract for the “North Field South” project. The contract is a 27-year-long LNG agreement (sale and purchase) and a collaboration deal. The latter would supply 3 million tons of LNG each year to Sinopec. Additionally, Sinopec will receive a 5% interest in their JV company from Qatar Energy as part of the NFS project.

  • In October 2023, BP announced a major expansion of its LNG (“Tangguh”) facility in, Indonesia. This enlarged Tangguh complex is estimated to account for more than one-third of Indonesian gas production. With this expansion, the total capacity is boosted to 11.4 million tons per year.

  • In August 2023, Chevron announced a strategic collaboration with Cummins by signing a memorandum of understanding agreement. Under the terms of the agreement, the two companies will intensify their earlier strategic collaborations on the production of hydrogen and renewable natural gas. The deal will also include liquid renewable fuels such as biodiesel, renewable biodiesel and gas mixtures. This cooperation aims to boost commercial and industrial usage throughout the North American region.

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Add-on Services

Should Cost Analysis

Component wise cost break down for better negotiation for the client, highlights the key cost drivers in the market with future price fluctuation for different materials (e.g.: steel, aluminum, etc.) used in the production process

Rate Benchmarking

Offering cost transparency for different products / services procured by the client. A typical report involves 2-3 case scenarios helping clients to select the best suited engagement with the supplier

Salary Benchmarking

Determining and forecasting salaries for specific skill set labor to make decision on outsourcing vs in-house.

Supplier Newsletter

A typical newsletter study by capturing latest information for specific suppliers related to: M&As, technological innovations, expansion, litigations, bankruptcy etc.

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