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Investment in LNG supply has always been cyclical
CIHI
Given the growing demand for LNG and the lack of recent investment in new generation facilities, several industry badysts have predicted a supply shortfall over the next decade.
According to the latest annual gas market report, Gas 2018, from the International Energy Agency (IEA), global demand for gas will increase by an average of 1.6% per year reach a little over 4,100 billion cubic meters in 2023, up from 3,740 billion cubic meters in 2017.
The current wave of LNG export projects will increase liquefaction capacity by 30% by 2023. This shift will be driven by increased US production, which accounts for nearly three-quarters of global export growth. total of LNG during this period, followed by Australia and Russia.
Attention to the gap
This is the good news, but the concern is that the lack of new LNG projects after 2020 could lead to tighter LNG markets. Given the long lead time for such projects, investment decisions will have to be made in the coming years to ensure an adequate supply of LNG beyond 2023.
"Investing in LNG supply has always been cyclical, with project proponents competing to meet the anticipated demand from buyers in the next four to five years," said Ben Wetherall, Gas & Gas division manager. Amp; LNG at ICIS, the global provider of data and information for the energy and petrochemical markets, explains. "This has generally resulted in periods of supply waves followed by periods when demand exceeds the new liquefaction capacity."
He adds that the current wave of LNG supply is largely based on Australian and US projects sanctioned in sufficient numbers between 2009 and 2015. "Final investment decisions regarding new liquefaction projects have been limited during the last years. million tonnes per year (mtpa) of new capacity sanctioned in 2016 and 2017, "he continues.
Long pipeline of projects
It takes about four years for new supply projects to develop, increasing the risk of potential supply constraints and tightening of the LNG market between the early and mid-2020s. However, these risks have been partially mitigated in recent months, with initial approval in October 2018 of Shell's LNG Canada project, followed last month by ExxonMobil and Qatar Petroleum, which are taking FID to the Golden Pbad project in the United States.
"This brings the total amount of new liquefaction capacity that has been sanctioned in the last 12 months to 37 Mtpa with a host of other supply options scrambling to get a job," he said. Wetherall. "The most cost-competitive projects to be sanctioned are a wave of new liquefaction trains from Qatar. Qatar suspended its moratorium on the development of North Field in 2017 and has since announced plans to develop four new LNG trains, bringing Qatar's total liquefaction capacity to 110 million tonnes a year. "
The additional volume of Qatar, as well as the supply from projects that have already reached the IDF in the last 12 months, could add nearly 70 million tons of new capacity by mid-2020. In addition, there are approximately 80 to 100 million tonnes of credible liquefaction capacity in East Africa, North America, Australasia, Russia and West Africa that could be sanctioned over the next two years. years.
"There is no doubt that the demand for a new wave of liquefaction capacity to meet the growth of demand induced by Asia from the beginning to the mid-2020s rises, but if the timelines of the FID project stop this year due to falling prices the risk of supply constraints in window 2022-2025 is therefore greater, "says Wetherall.
Future growth of LNG
Global LNG production will reach nearly 390 million tonnes in 2020, according to ICIS Edge's supply forecast. This will mark the end of the current phase of starting new export projects. Production will be more evenly distributed globally, with Australia, Qatar in the Middle East and the United States as the top three suppliers.
The next wave of new production will come from 2023 and will see a further increase in North American production, mainly based on shale gas supply. However, Qatar, Russia, Africa and Asia will also develop new export projects thanks to the substantial investments of major global oil and gas companies seeking to expand their gas and LNG portfolios.
A buyer's market
Wetherall says that on the buyers' side, China will remain the world's leading growth market with new LNG import terminals allowing for increased imports alongside the start of the Russian pipeline. He also believes that long-term demand from Japan, the biggest buyer in the world, will diminish as the country moves away from fossil fuel-based energy production, even if the pace of change will also depend on the viability of nuclear power generation.
"The market needs new sources of LNG demand, which can come from South and Southeast Asia and potentially from the transport sector," he says. "Other new buyers, such as those in the Americas, may only need limited volumes of LNG to offset unpredictable renewable energy production." The supply of LNG in Europe will increase with the decline in domestic gas production.
"Leading portfolio sellers such as Shell, Total, ExxonMobil, Qatar Petroleum and BP are expected to drive the next wave of LNG supply, using balance sheet financing and their strong marketing and trading functions to develop new projects. Nevertheless, long-term contracts, although subject to certain pressures, will continue to underpin new investments. Spot trading will increase sharply but will retain only a minority share of the overall share of LNG sales. "
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Investment in LNG supply has always been cyclical
CIHI
Given the growing demand for LNG and the lack of recent investment in new generation facilities, several industry badysts have predicted a supply shortfall over the next decade.
According to the latest annual gas market report, Gas 2018, from the International Energy Agency (IEA), global demand for gas will increase by an average of 1.6% per year reach a little over 4,100 billion cubic meters in 2023, up from 3,740 billion cubic meters in 2017.
The current wave of LNG export projects will increase liquefaction capacity by 30% by 2023. This shift will be driven by increased US production, which accounts for nearly three-quarters of global export growth. total of LNG during this period, followed by Australia and Russia.
Attention to the gap
This is the good news, but the concern is that the lack of new LNG projects after 2020 could lead to tighter LNG markets. Given the long lead time for such projects, investment decisions will have to be made in the coming years to ensure an adequate supply of LNG beyond 2023.
"Investing in LNG supply has always been cyclical, with project proponents competing to meet anticipated buyer demand in four or five years," said Ben Wetherall, global gas and LNG manager for CIHI. data and information for the energy and petrochemical sector. markets, explains. "This has generally resulted in periods of supply waves followed by periods when demand exceeds the new liquefaction capacity."
He adds that the current wave of LNG supply is largely based on Australian and US projects sanctioned in sufficient numbers between 2009 and 2015. "Final investment decisions regarding new liquefaction projects have been limited during the last years. million tonnes per year (mtpa) of new capacity sanctioned in 2016 and 2017, "he continues.
Long pipeline of projects
It takes about four years for new supply projects to develop, increasing the risk of potential supply constraints and tightening of the LNG market between the early and mid-2020s. However, these risks have been partially mitigated in recent months, with initial approval in October 2018 of Shell's LNG Canada project, followed last month by ExxonMobil and Qatar Petroleum, which are taking FID to the Golden Pbad project in the United States.
"This brings the total amount of new liquefaction capacity that has been sanctioned in the last 12 months to 37 Mtpa with a host of other supply options scrambling to get a job," he said. Wetherall. "The most cost-competitive projects to be sanctioned are a wave of new liquefaction trains from Qatar. Qatar suspended its moratorium on the development of North Field in 2017 and has since announced plans to develop four new LNG trains, bringing Qatar's total liquefaction capacity to 110 million tonnes a year. "
The additional volume of Qatar, as well as the supply from projects that have already reached the IDF in the last 12 months, could add nearly 70 million tons of new capacity by mid-2020. In addition, there are approximately 80 to 100 million tonnes of credible liquefaction capacity in East Africa, North America, Australasia, Russia and West Africa that could be sanctioned over the next two years. years.
"There is no doubt that the demand for a new wave of liquefaction capacity to meet the growth of demand induced by Asia from the beginning to the mid-2020s rises, but if the timelines of the FID project stop this year due to falling prices the risk of supply constraints in window 2022-2025 is therefore greater, "says Wetherall.
Future growth of LNG
Global LNG production will reach nearly 390 million tonnes in 2020, according to ICIS Edge's supply forecast. This will mark the end of the current phase of starting new export projects. Production will be more evenly distributed globally, with Australia, Qatar in the Middle East and the United States as the top three suppliers.
The next wave of new production will come from 2023 and will see a further increase in North American production, mainly based on shale gas supply. However, Qatar, Russia, Africa and Asia will also develop new export projects thanks to the substantial investments of major global oil and gas companies seeking to expand their gas and LNG portfolios.
A buyer's market
Wetherall says that on the buyers' side, China will remain the world's leading growth market with new LNG import terminals allowing for increased imports alongside the start of the Russian pipeline. He also believes that long-term demand from Japan, the biggest buyer in the world, will diminish as the country moves away from fossil fuel-based energy production, even if the pace of change will also depend on the viability of nuclear power generation.
"The market needs new sources of LNG demand, which can come from South and Southeast Asia and potentially from the transport sector," he says. "Other new buyers, such as those in the Americas, may only need limited volumes of LNG to offset unpredictable renewable energy production." The supply of LNG in Europe will increase with the decline in domestic gas production.
"Leading portfolio sellers such as Shell, Total, ExxonMobil, Qatar Petroleum and BP are expected to drive the next wave of LNG supply, using balance sheet financing and their strong marketing and trading functions to develop new projects. Nevertheless, long-term contracts, although subject to certain pressures, will continue to underpin new investments. Spot trading will increase sharply but will retain only a minority share of the overall share of LNG sales. "
