#LNGAmericas 2–4 November 2021

American LNG Exports Jump Past Russia For Third Place Worldwide

Jan 26, 2020 by Jude Clemente

Really starting in February 2016, the U.S. liquefied natural gas (LNG) boom continues apace. The U.S. now has six export facilities online with 15 trains in service. In 2019, domestic LNG exports averaged around 5 Bcf/d, or almost 65% more than in 2018. U.S. LNG feedgas consumption averaged a record 8.0 Bcf/d in December. As our flagship, five trains are online at Cheniere Energy’s Sabine Pass in Louisiana and a sixth is under construction, with the facility averaging almost 4 Bcf/d of feedgas in December. For the year, capacity utilization at our terminals averaged almost 95% baseload and over 80% peak.

This past week, U.S. LNG feedgas hit a record 9.5 Bcf/d. This equates to over 10% of total U.S. gas production (see Figure 1). The surge in feedgas deliveries was driven by a ramp-up at Freeport LNG in Texas, Cameron LNG in Louisiana, and also Sabine Pass. Some 12-13 Bcf/d of feedgas demand will be reached by the end of this year. For comparison, U.S. gas for electricity averaged 31 Bcf/d, with industrial use at 23 Bcf/d. “EIA expects U.S. net natural gas exports to almost double by 2021.”

The U.S. accounted for over half of all new global liquefaction capacity added in 2019. Passing Malaysia, we are now the world’s third largest LNG seller, behind leader Australia and second place Qatar. Our rapid ascent is even more impressive since the global gas market has been oversupplied, and low prices generally work to make U.S. LNG less competitive. Moreover, the trade war with China has made it almost impossible to feed the world’s LNG sinkhole. With still a 25% tariff on our gas, China has not bought U.S. LNG since March 2019. 

 

Looking forward, this year U.S. LNG feedstock deliveries will continue to mount in 2020. The remaining trains at Freeport, Cameron, and Elba Island will be placed into service, and a third train at Corpus Christi is coming in 2021. Some ~23 projects with a capacity of 35-40 Bcf/d are looking to ride the second U.S. wave of gas exports in another round of development. Continually bolstered by such low domestic prices that make our LNG highly attractive for the world’s importers, the U.S. is now on pace to be the largest LNG exporter by 2023. Just this past week, U.S. Henry Hub gas prices plunged below $2.00 for the first time since end of May 2016.  

The boom in U.S. LNG exports really is: a giant global lifesaver. After all, natural gas is the go-to fuel for both rich and poor countries alike to lower greenhouse gas emissions and backup naturally intermittent wind and solar power. Rich Germany is a perfect example of this clear reality. The Germans have spent literally hundreds of billions of dollars incorporating wind, solar, and battery storage at all costs, yet Germany is now looking at building at least four LNG import terminals. 

Without the U.S., the importing gas nations will be forced to turn to a global supply chain increasingly dominated by Russia and its Gas Exporting Countries Forum. U.S. policymakers should know that many of the world’s gas companies are endlessly backed by their own governments to grab natural gas hegemony. The “Natural Gas Triad” of Russia, Iran, and Qatar control some 60% of proven global gas reserves. Thus, U.S. LNG (and oil) exports are the ultimate anti-collusion weapon that we have in our arsenal: “U.S. LNG Can Punish Russian Meddling.” Oil and gas exports account for 40-45% of the federal budget for Vladimir Putin to play with.

Indeed, seeking to buffer Putin’s extending influence, U.S. LNG (“freedom gas”) exports to Europe boomed to ~2.0 Bcf/d in 2019, up from ~0.4 Bcf/d in 2018. Spain, UK, and France took 60%. U.S. LNG might be our best way to help friends. The International Energy Agency reports that U.S. LNG saved our European allies $8 billion in gas costs in 2018. Europe sensibly wants to double or even triple its U.S. LNG imports within five years.

But beyond Russia, more U.S. LNG is really a global moral imperative. We unacceptably live in a world where over three billion humans subsist using biomass (e.g., wood, dung) for cooking and heating, an indoor air pollution that kills over four million people per year. As the advisor to the rich OECD nations, the International Energy Agency has continually put more gas as the world’s centerpiece grand energy strategy to reduce emissions, grow the economy, and erase a horrific global poverty where six in every seven humans live in still developing countries.

This cannot be stressed enough this election year: the International Energy Agency has specifically cited more natural gas usage as to why the U.S. has been slashing greenhouse gas emissions to combat climate change faster than any country “in the history of energy.” U.S. LNG is critical to help others do the exact same thing.

Simply put, the “anti-shalers” stand on the wrong side of history.

Especially for those in the industrial sector, U.S. gas users must also realize some simple truths. More LNG exports beget more production to help keep our own prices low. This is exactly what has happened for the U.S. oil market. Despite flat domestic demand, our crude output has risen 50% since 2016, when a new law removed an export ban (U.S. crude exports have exploded six-fold since to average 3 million b/d in 2019).

LNG exports explain why the International Energy Agency projects that the U.S. will account for 35-40% of new gas output in the 2020s alone. Even with such low domestic prices, soaring U.S. gas reserves are the engine for our own domestic production and LNG boom (see Figure 2). The U.S. Department of Energy concludes that we have 1,025 trillion cubic feet of technically recoverable shale gas resources.

Sempra’s liquefied natural gas export plant in Louisiana expands

The $10 billion Cameron LNG facility opens a second processing unit

By ROB NIKOLEWSKI, DEC. 30, 2019

Cameron LNG facility in Hackberry, Louisiana, ships super-cooled natural gas to exports markets around the globe. (Sempra LNG )

The $10 billion liquefied natural gas, or LNG, facility on the Gulf Coast of Louisiana that is majority-owned by a subsidiary of San Diego’s Sempra Energy has successfully opened a second unit that will soon export natural gas to markets across the globe.

“We are pleased to reach this important milestone in the development of the liquefaction facility,” Lisa Glatch, chief operating officer for Sempra LNG, said in a statement.

Called Cameron LNG, the massive plant opened commercial operations in August when it launched Train 1 of the facility. LNG production units are called “trains,” and plant officials earlier this month announced Train 2 had begun producing liquefied gas that is scheduled to load onto cargo ships in the first quarter of 2020.

A third train is scheduled to start exporting LNG from Cameron in the third quarter of 2020.

By the time all three trains are up and running, the Cameron LNG facility along the Calcasieu River anticipates exporting as much as 12 million tons of LNG per year, or 1.7 billion cubic feet per day. The first phase of the Cameron LNG facility on the Gulf Coast of Louisiana is anticipated to generate from $400 million to $450 million per year for Sempra.

Cameron is one of a number of LNG plants that have been approved by federal regulators in response to the rapid increase in natural gas production in places such as the Permian Basin in Texas and southeastern New Mexico in the past decade.

Natural gas can then be sent via pipeline to LNG facilities, where it can be super-cooled to minus 260 degrees Fahrenheit, loaded onto specially made cargo tanks on double-hulled ships and taken to gas-hungry destinations such as Europe and Asia. Japan buys more LNG than any other country and demand in in China, which is eager to switch from coal to natural gas, is expected to continue rising.

Cameron LNG is jointly owned by Sempra, French multinational Total, Mitsui of Japan and a consortium of other Japanese companies that includes Mitsubishi. Sempra owns a 50.2 percent stake in the project.

Sempra is also considering constructing two other LNG facilities: one in the Texas Gulf Coast town of Port Arthur and an additional export component for an already existing LNG facility operated by the company’s IEnova subsidiary in Mexico near Ensenada called Energía Costa Azul. A final decision is expected on Port Arthur by the middle of 2020; the decision on the Ensenada facility is anticipated to come in the first quarter of the year.

The LNG boom has its critics, though.

Some manufacturers worry that the increasing volume of natural gas that is being exported may result in lower natural gas capacity and higher prices for domestic gas customers stateside.

“All U.S. consumers should be very concerned about the Sempra export terminal and the many others that the (U.S. Department of Energy) has already approved or plans to approve,” said Paul Cicio, president of the Industrial Energy Consumers of America, a trade group, in an email.

Sempra LNG officials disagree, saying analysis indicates “ample (amounts of) export for some period of time to come.”

Environmental groups have also come out in opposition. While natural gas burns twice as clean as coal, it is a fossil fuel and methane can leak from pipelines, well sites and other infrastructure. Methane is about 30 times more potent than CO2 when released into the atmosphere.

LNG export terminals, pipelines and natural gas power plants “are long-term, expensive investments that have a good chance of becoming uncompetitive, or economically ‘stranded,’ since there are much cleaner, cost-competitive (or soon to be) alternatives to reach our climate goals,” the Natural Resources Defense Council officials said in a blog earlier this year.

The U.S. Energy Information Administration estimates that by 2025, the U.S. will have the world’s largest LNG export capacity, surpassing both Qatar and Australia.

FERC Approves Site Prep for Tellurian’s Driftwood LNG Export Plant

U.S. energy regulators approved Tellurian Inc’s request to start site preparation work at its proposed $27.5 billion Driftwood liquefied natural gas (LNG) export project in Louisiana.

1. Driftwood, 2. Haynesville Global Access, 3. Permian Global Access, 4. Delhi Connector (source: Tellurian)

The U.S. Federal Energy Regulatory Commission (FERC) said on Wednesday that Driftwood could start vegetation clearing and grading, demolition and removal of existing buildings, and dredging of marine berths, among other activities.

“With FERC’s approval, we are doing some preliminary work on the site,” Tellurian spokeswoman Joi Lecznar said in an email on Thursday, noting “we have progressed to completing over 27% of our engineering, and we have ordered some equipment in order to prepare for construction.”

Driftwood is designed to produce 27.6 million tonnes per annum (MTPA) of LNG or about 3.6 Bcf/d of natural gas. Tellurian has said it plans to start building the liquefaction plant in early 2020 and produce the first LNG from the facility in 2023.

The company plans to source natural gas from the Permian Basin to Driftwood via its proposed Permian Global Access Pipeline (PGAP), Tellurian said drew strong interest during an open season from West Texas natural gas producers seeking delivery to the rapidly growing natural gas market in Southeast Louisiana. 

The $3.7 billion PGAP is a proposed 625-mile, 42-inch interstate natural gas pipeline originating at the Waha Hub in Pecos County, Texas, and terminating at Gillis, Louisiana, north of Lake Charles, Louisiana. Construction could begin as early as 2021, and the project could begin service as early as 2023 with a capacity of 2 Bcf/d.

PGAP is one of three proposed pipelines that would comprise the estimated $7.3 billion Tellurian Pipeline Network, which is integral to its planned $15.2 billion Driftwood LNG export project near Lake Charles. 

The pipeline network also includes the proposed Haynesville Global Access Pipeline (HGAP) and the Driftwood Pipeline. HGAP would be a 200-mile, 42-inch pipeline with capacity to transport 2 Bcf/d to the same interstate pipelines near Gillis. The 96-mile, 48-inch Driftwood Pipeline would provide 4 Bcf/d transport from Gillis to the Driftwood LNG facility.

Driftwood is one of about a dozen LNG export projects in North America that said they could decide to build their plants in 2020. Together those plants, which analysts said will not all be built, would produce over 160 MTPA of LNG.

Several of those projects, including Driftwood, had previously said they could make that final investment decision in 2019.

The U.S.-China trade war and a global oversupply of the fuel that caused gas prices in Europe and Asia to fall made it difficult for several LNG developers to sign enough long-term customer agreements this year. Those agreements are needed to secure financing for their billion dollar projects.

Total world demand for LNG reached a record 316 MTPA in 2018 and is projected to soar by around 100 MTPA by 2023, according to the U.S. Energy Information Administration.

Unlike most proposed U.S. LNG export projects that will liquefy gas for a fee, Tellurian is offering customers the opportunity to invest in a full range of services from production to pipelines and liquefaction.

– Reuters and P&GJ staff report

Houston Chronicle: Magnolia LNG’s supply deal with Vietnam takes another step forward

Dec. 27, 2019 Updated: Dec. 26, 2019 7:24 p.m.

A liquefied natural gas supply deal between the proposed Magnolia LNG export terminal in Louisiana and the Vietnamese government took a major step forward.

In a Dec. 19 decision, the Vietnamese government added the Bac Lieu LNG-to-Power project to its National Power Development Plan. Under the plan, Singapore-based Delta Offshore Energy will build a natural gas-fired power plant in Bac Lieu province and a supporting offshore LNG import terminal.

LNG Limited, the Australia and Houston-based company developing Magnolia LNG export terminal in Lake Charles, landed a 20-year deal in September to supply 2 million metric tons of liquefied natural gas per year to Delta’s 3,200-megawatt power plant.

The addition of the project to Vietnam’s National Power Development Plan clears the path for Delta to negotiate and finalize the power purchase agreement for the natural gas-fired power plant, which had originally been planned as a coal-fired facility.

Magnolia LNG has yet to be built, but the company holds a federal permit to build a plant that will produce 8 million metric tons of LNG per year. LNG Limited is seeking permission to boost that production by another 800,000 metric tons per year; the Vietnamese supply represents one-fourth the proposed plant’s currently permitted production.

Delta Offshore Energy plans to build a natural gas power plant in Bac Lieu province as well as an offshore LNG import terminal, known in the industry as a floating storage regasification unit, or FSRU.

Tankers from Magnolia LNG will arrive at the planned FSRU, where the supercooled liquid fuel will be converted back into its gas form and fed into an underwater pipeline that will move the natural gas to the onshore power plant.

LNG Limited is headquartered in Australia but is in the process of moving its global headquarters to Houston.

The Federal Energy Regulatory Commission in April 2016 permitted the company’s Magnolia LNG project to produce 8 million metric tons of liquefied natural gas per year. LNG Limited’s request to boost production by 800,000 metric tons of liquefied natural gas per year remains pending.

Houston service company KBR and South Korean construction firm SK E&C Co. Ltd will serve as the engineering, procurement and construction firms for the LNG export terminal project.

By Sergio Chapa

Reuters: Mexico to keep importing natural gas as U.S. exporters face oversupply

JANUARY 3, 2020

MEXICO CITY (Reuters) – Mexican President Andres Manuel Lopez Obrador said on Friday it will be a long time before Mexico produces enough natural gas to become self-sufficient and the country will continue to rely on imports until then, a boon for U.S. exporters.

Mexico imports more than 70% of its gas needs from abroad, and more than 90% of those purchases come from the United States.

“It’s going take a long time to be self-sufficient in gas,” Lopez Obrador told reporters at his daily news conference. “We’re going to be forced to import gas because gas production and extraction was completely neglected.”

Lopez Obrador has promised to reverse declining oil and gas production by strengthening state oil company Pemex.

But he has also scrapped the auction of oil and gas blocks to private firms, which some analysts say runs counter to the goal of boosting national production.

Mexico’s oil and gas regulator has said Mexico should speed up development of its natural gas reserves, including potentially massive shale deposits, to curb a growing “supply risk” fed by excessive dependence on U.S. supplies.

U.S. natural gas pipeline exports to Mexico hit a monthly historic high of 170.6 billion cubic feet in October, according to data published by the U.S. Energy Information Administration. Mexico also imports liquefied natural gas.

“For U.S. producers, Mexico is an important outlet for exports, especially given the current oversupply we are seeing particularly in states such as Texas,” said James Fowler, senior energy analyst for the Americas at global commodity market intelligence provider ICIS.

 

Fowler said Mexican demand for imported gas should continue growing in the coming years as new pipelines are completed in central Mexico and new power plants come online.

“While some small new fields are expected to come online in the next couple of years, these volumes are unlikely to make much of a difference as Pemex’s production from older fields continues to fall,” he added. “At best, new production coming onstream in the next 2-3 years will halt the decline and stabilize production at current levels.”

Reporting by Diego Ore, Anthony Esposito and Marianna Parraga; Editing by Paul Simao

 

Lake Charles to host LNG and Gas Summit & Exhibition

Lake Charles, Louisiana will host for the first time the CWC World LNG and Gas Series: Americas Summit & Exhibition on November 10- 12 2020. Mayor Nic Hunter joined several local officials at City Hall Thursday 26th September to discuss the event. Produced by the CWC Group, the Summit will bring together international government and LNG and gas decision makers. The event has been held 18 times in the U.S. in the following locations — New Orleans, Houston, Austin and San Antonio.

“There’s little doubt that Southwest Louisiana has emerged as a global epicenter of LNG export activity,” Hunter said. Kyle Edmiston, president/ CEO of the Southwest Louisiana Convention and Visitors Bureau, said the Summit will reinforce the U.S. as the world’s largest gas exporter. The target audience is executive-level managers from LNG export projects, LNG & gas buyers, project developers, government representatives, investment banks and others.

“It’s going to promote U.S. LNG to the buyers from around the world … act as a catalyst for foreign investment and create a partnership between international firms and local companies,” Edmiston said.

Other local agencies that helped secure the summit in Lake Charles included the police juries in Calcasieu and Cameron parishes, Port of Lake Charles, Cameron Parish Port, Harbor and Terminal District and the Southwest Louisiana Economic Development Alliance. Calcasieu Administrator Bryan Beam said various groups began working together when the first wave of major industrial projects were announced several years ago. He said that work has refined and improved the process of coordination.

“Something like this doesn’t just happen overnight,” Beam said. “Multiple agencies coming together wasn’t always a natural thing. It is in here.” Beam added that Southwest Louisiana is “worth having this event.” “We know it, and now others know it,” he said.

Clair Marceaux, Cameron Port Director, attended the summits in Austin and Houston. She said the LNG being exported out of Cameron Parish is “third among nations in the world.” “Our region should benefit from every single part of these heavy-industrial projects,” she said. “This is one way that our region gets to do this.”

3 Takeaways from 2017 CWC LNG Americas Summit

On the week of June 20th, many professionals from across the Liquefied Natural Gas (LNG) industry assembled in Houston to share thoughts, ideas, and information on the past, present, and future of the industry. We are witnessing historic times, as LNG global trade has grown from 155 mtpa (million tonnes per annum) in 2006 to 258 mtpa in 2016 and is further expected to grow to 350 mtpa by 2020, resulting in a 15-year average annual growth rate (CAGR) of 5.5%, more than twice the U.S. GDP growth. U.S.-based suppliers are ramping up from essentially zero to being one of the world’s largest suppliers of LNG in the next few years.  In addition to the 70 mtpa of domestic production already authorized and under construction, the Department of Energy has authorized an additional 75 mtpa of LNG to be exported to countries that do not hold Free Trade Agreements with the U.S. LNG as a fuel source has been a energy staple for many Asia-Pacific countries for decades, and is increasing in importance in other regions, as countries look to diversify their energy mix while lowering carbon emissions. The COP21 climate accord in Paris would further drive the value proposition for cleaner burning natural gas around the world, although the Trump administration’s current position against this agreement casts some doubt on the accord being an incentive for change. In spite of the recent success in LNG as a growing industry, there remain significant challenges to continued development, as outlined at the LNG Summit and summarized below.

Global LNG trade, past and projected, Source: Shell LNG Outlook 2017

A Brief Introduction to Liquefaction

LNG is subcooled methane, chilled through a “liquefaction” process, such as the Air Products C3MR process (diagram below), to approximately minus 250 degrees Fahrenheit. The equipment employed is essentially a large, industrial refrigeration system. The liquid cryogenic gas is then transported via specialized shipping vessel to other parts of the globe, where it is then converted back to gaseous state and injected into the regional gas pipeline networks for final consumption. LNG technology allows natural gas to be traded by parties that are not connected otherwise via pipeline, such as overseas trading partners. LNG export businesses require an abundant source of natural gas, since the liquefaction assets are long-lived and require a decades-long time horizon to justify the heavy capital expenditure. In the case of the U.S., massive natural gas reservoirs have been made available by modern shale rock production technologies, allowing the economic export of natural gas from the Lower 48 states for the first time in history.

A typical LNG liquefaction cycle, Source: Air Products’ C3MR Liquefaction Process

 

3 Takeaways from the Houston LNG Summit

1)     A spike in global LNG supply has led to projected market saturation through atleast 2020

The industry is witnessing its third large wave of new supply, following Qatar in 2010, Australia in 2014 and now the U.S. The surge in LNG export facilities has led to a market viewed by analysts to be oversupplied until some time between 2020 and 2025. This has created a buyers’ market where long-term commitments are no longer the standard procedure and flexibility in contractual and delivery terms is expected. However, with the typical LNG export facility requiring atleast 5 years to develop, construct, and commission, the projected supply/demand profile implies that new investment will be required in the next couple of years in order to satisfy future demand.

There are many factors that could influence the demand trend in either direction. On the bullish side, the emerging LNG importers of China and India could significantly increase their share of LNG as their growing economies demand more energy. These economies are looking to supplement domestic production, while diversifying energy sources away from pipeline import gas. The mature markets of Japan, South Korea, and Taiwan are expected to remain flat, but could see some upside if these markets continue to prefer gas over nuclear power generation.

 

LNG Global Supply/Demand, Source: BP Statistical Review of World Energy 2017(Note: 10 Bcf/d = 75 mtpa)

As for the bearish argument, even though global prices for LNG have dropped considerably in recent years, today being quoted around $6/MMBtu DES East Asia (incl. shipping), they remain more expensive and volatile than coal for power generation. The emerging LNG importers remain price conscious, and a moderate increase in LNG price could substantially temper demand for the commodity. Furthermore, LNG competes with pipeline gas and domestic gas production in regional markets, which could also undercut price, depending on the situation. This is particularly true in the markets of Mexico, Egypt, and India, where there is substantial development of domestic gas production. The mature markets for LNG show little possibility for large growth, while the emerging markets show considerable challenges to convert from existing sources, such as fuel oil or coal, to LNG, namely credit quality, capital availability, and economic stability. As mentioned earlier, the U.S. withdrawal from the COP21 climate accord may cause a lack of economic incentive for other nations to convert their higher carbon energy supplies to LNG, which is often more costly from a capital investment perspective.

LNG Price History, Source: BP Statistical Review of World Energy 2017

2)     The macro trend toward short-term deals, away from long-term supply agreements will require innovation in financing for new projects

The first wave of U.S. projects have been underwritten by banks based on long-term (20 year) supply agreements with major, creditworthy buyers. As the market has become saturated with long-term deals, emerging market buyers are now looking for more flexible, short-term deals, which will require a considerable change in how these large export projects are financed. Short-term agreements, which recently hit a high of 25% of total LNG trade, provide less visibility into future cashflows and debt service coverage for banks, export credit agencies (ECAs), and international financial institutions, such as the World Bank, to be able to confidently lend money against the assets. With the spot price of LNG being volatile and recently hitting its lowest level in a decade, the concept of a “merchant” LNG facility (one without a contracted anchor customer) is difficult to conceive and execute to the satisfaction of all stakeholders. This is coming at a time where some buyers are requiring destination restrictions, a common contractual element, to be eliminated, thus providing more options and flexibility to the buyer. Therefore, there must be a new commercial solution for financing large LNG export projects, which provides adequate visibility for the lenders, investors, and customers, while minimizing capital risk and providing the possibility of a satisfactory return on debt and equity investment. This is an area where the portfolio players, companies who purchase LNG to subsequently distribute through their own marketing channels, provide great leverage in making LNG a viable long-term market. The portfolio players, often large companies with substantial balance sheets, help to provide liquidity in the market, apart from long-term counterparty contracts.

With a lower project LNG market price, it is imperative that project developments be executed at a minimal cost. In recent times, the industry has been plagued with cost overruns, with projects escalating in cost from $1,000/tpa a decade ago to over $3,000/tpa most recently in the Gorgon LNG project. It is evident that proposed projects with all-in budget cost estimates, which include the often costly feed gas pipelines, at a range above $1,000/tpa will be a longer shot to be funded than those that are more cost competitive. The most competitive project developments may target a cost of approximately $500-700/tpa using the advantages of sunk costs in prior asset development, design standardization, and larger individual train capacity. However, even at this ambitious cost target, projects may have difficulty achieving the pro-forma financial returns necessary to be fully funded in today’s environment.

 

 

LNG plant capital costs as a function of train size and year of installation, Source: A Historical Review of Turbomachinery for LNG Application (Apache Corp.)

In this area, it appears that U.S. gulf coast developments may have an advantage, as many of these projects are being sited on existing “brownfield” facilities with existing infrastructure, such as storage tanks, jetties, pipework, and shipping lanes, that may be reused in the export facility, thus reducing capital cost. In addition, the U.S. gulf coast already has an established network of pipelines, which makes the development of feed gas pipelines to the terminals less onerous. That being said, there are projects in other locations that do have their own distinct advantages and strategic plays.

3)     Floating Storage and Regasification Units (FSRU’s) have been vital in opening up emerging markets

The FSRU has come into development within the last decade and is recently starting to scale at very significant levels. An FSRU is a mobile, floating facility which reconverts the LNG back to gaseous form on an offshore receiving site, rather than a permanently-installed, land-based site. Therefore, FSRU’s maintain the advantages of speed to market, lower capital expense, fewer regulatory hurdles, and flexiblity in location, over the traditional land-based regasification design. With most import terminals having utilization rates of only 30-60% due to seasonality of demand, there is ample room for efficiency improvement. In this respect, the FSRU holds a key solution in the ability to re-deploy regasification capacity as market demand shifts.

The FSRU has been responsible for opening up new markets, namely, the Caribbean, South America, Pakistan, as well as parts of the Middle East. It has aided in the transformation of the LNG industry from a slow-changing, long-term counterparty contract based market, into a dynamic, short-term, trading-based market, providing more liquidity and routes to market for LNG suppliers. The flexibility of FSRU’s, which can be transported from site to site in response to market demand, has allowed developers to underwrite new FSRU vessels through lenders, thus providing more routes to market for companies looking to secure LNG offtake agreements.

Summary

LNG continues to progress as an influential source of global energy due to abundant supplies of natural gas, advent of cutting edge technologies, and highly available capital funding for projects. The global market appears to be supply-saturated for atleast the remainder of this decade with the U.S. supplying 70 mtpa out of the projected global supply of 400 mtpa. There are many factors which could influence the demand curve in either direction, leading to further new project development, or atlernatively, causing producers to temporarily shut-in facilities from lack of demand. In either case, it appears there will remain a baseline of LNG trade for many years to come as several major nations have solidified long term deals to feed their domestic energy infrastructure with LNG.

_______________________

Article authored by Eric M. Robken

Eric is an experienced engineer in LNG equipment design and manages Ashland Heights Investments, a private practice which provides investment management services. He holds degrees in Mechanical Engineering, MBA-Finance, is a Licensed Professional Engineer (Texas), and is a Series 65 registered investment advisor.

Poland plans FSRU, PGNiG executive says

Trading arm of PGNiG to open London office in New Year

Discussions are underway in Poland to install a floating storage and regasification unit (FSRU) as the country moves to diversify its supply.

PGNiG Supply & Trading managing director Uwe Bode told delegates to the CWC World LNG Conference in Barcelona that plans are ongoing to install an FSRU near Gdansk that would be up and running by 2022.

This would be in addition to Poland’s land-based terminal, which is controlled by state run Polskie Gornictwo Naftowe i Gazownictwo (PGNiG). This facility started

Full article here.

BP and Shell ready for new LNG landscape

Senior executives from BP and Shell are optimistic about the future of global gas and LNG demand, as well as the industry’s ability to manage the new wave of demand growth.

Speaking at the CWC World LNG Summit in Barcelona on Tuesday, Jonty Shepard, chief operating officer of BP’s LNG division, said that while supply would not be an issue for the foreseeable future, growing demand presents certain challenges. “It’s a healthy market and demand is growing – but the sources of that demand are changing,” said Shepard.

He said LNG suppliers needed to accommodate several new buyers who were seeking shorter, more flexible terms. “We don’t want to end up in the 2012 situation where there wasn’t enough supply, so we [the industry] destroyed demand.”

View full article.

Malaysia’s Melaka LNG terminal. The LNG market could see a shift in demand sources. (Petronas)

Malaysia’s Melaka LNG terminal. The LNG market could see a shift in demand sources. (Petronas)

The US to become the world’s biggest LNG supplier by 2035

Baker Botts L.L.P. has announced that three lawyers from its highly influential LNG practice will be taking part in the CWC World LNG & Gas Series 15th Americas Summit from 20 – 23 June at The Houstonian Hotel, Houston, Texas, USA.

Now in its 15th year, the Americas Summit offers a platform for senior, commercially-minded LNG executives from across the LNG and gas value chain to access key international LNG buyers and sellers, and discuss the latest market developments. 

Program highlights: 

“Industry experts are predicting a bright future for LNG in the Americas and forecast that by 2035 the US will become the world’s biggest LNG supplier and the cheapest source of new LNG. Taking best advantage of the wealth of opportunities this may create, however, will not come without new commercial challenges. The industry must continue to innovate and reduce costs by developing fresh approaches to LNG sales, projects and business structures in order to keep pace with market developments,” said Jason Bennett Co-Chair of the Global Projects Group and partner in the Houston office at Baker Botts. 

dmg events Global Energy Portfolio