Liquefied Natural Gas: Multi-billion dollar investments at risk

Today, liquefied natural gas (LNG) represents a significant component of the energy consumption of many countries and accounts for about one third of total internationally traded gas. The global LNG production (liquefaction) nameplate capacity has grown up to 320 million tonnes per annum (MTPA) or 435 billion cubic metres in the end of 2015 from 119 MTPA in 2000. US shale production boom and recovery in oil prices in 2010-2012 after the global financial crisis created an attractive environment for new LNG projects.Enormous 798 MTPA of new production capacity has been proposed globally in new liquefaction facilities (mostly in the US, Canada and Australia). Of that amount, 117 MTPA of capacity are currently under active construction.
If implemented, these projects could not only make the United States and Canada the largest LNG capacity holders and exporters, but also could create thousands of American jobs, lower trade deficit and strengthen the U.S. geopolitical position. In most optimistic scenario, US could become the world's largest LNG exporter by 2020, with about 200 MTPA of LNG export capacity installed. However, recent collapse in oil prices has made the crude oil competitive again in terms of energy equivalence and put many of proposed LNG projects at risk of mothballing.

As the IEA says: "Due to its capital-intensive nature, the liquefied natural gas (LNG) industry faces an uphill battle. Those projects currently under construction today are set to come on stream broadly as planned, as large upfront capital costs have already been incurred. Beyond that, however, new LNG plants will struggle to get off the ground. Today LNG prices simply do not cover the capital costs of new plants. Several projects have already been scrapped or postponed, and the number of casualties will rise if prices do not recover. Final investment decisions (FID) taken in the next 24 months will determine the amount of incremental LNG supplies available in the early part of the next decade. If current low prices persist, LNG markets could start to tighten up substantially by 2020."

Realistic estimates based on projects which are currently under construction, bring down the US LNG export capacity prospects to about 43 MTPA by the end of 2020. That number assumes the shutdown of 46-years old Kenai LNG plant in Alaska and successful commissioning of 10 LNG Trains: Sabine Pass LNG (4 Trains) and Cameron LNG (3 Trains) in Louisiana, 2 Trains in Freeport LNG, Texas and Cove Point expansion project at Chesapeake Bay in Southern Maryland.

No comments:

Post a Comment