Go‐ahead for liquefied natural gas projects as developers eye widening mid‐2020s supply gap

• Date: 01 April 2019
• Published date: 01 April 2019
• DOI: http://doi.org/10.1111/oet.12680

LOOKING AHEAD

Go-ahead for liquefied natural gas projects as developers eye

widening mid-2020s supply gap

Progress at proposed liquefied natural gas (LNG) liquefac-

tion projects around the world has picked up over recent

months, after a long period without approvals, as a signifi-

cant anticipated supply deficit by the mid-2020s becomes

increasingly apparent. The trend is likely to accelerate this

year, despite a weak LNG market currently.

With most analysts now forecasting a 60–80 mn t/y defi-

cit in LNG supply by the mid-2020s (if no more supply

capacity is built), LNG developers are queuing up to launch

projects to capture volume in the expanding market (see

Table 1). Demand is already 40 mn t/y higher in Asia—

largely due to China’s efforts to reduce coal use—than had

been forecast only a couple of years ago. Lower spot prices

this year, as a wave of new supply hits the market, is also

helping coal-to-gas switching among price-sensitive con-

sumers in India and Bangladesh—lifting demand further.

Nevertheless, demand in the mid-2020s may still not be suf-

ficient to absorb all the proposed LNG liquefaction plants,

so some could be delayed.

The run of new project approvals started in mid-2018,

with the Corpus Christie 3 expansion in Texas,

underpinned by long-term supply agreements with CNPC

and Poland’s PGNiG. Since then, in October, LNG

Canada on British Columbia’s Pacific coast became the

first onshore greenfield Final Investment Decision (FID)

since 2013 (following Eni’s 3.4 mn mt/y greenfield off-

shore Coral floating liquefaction natural gas (FLNG) plant,

which was given the go-ahead in 2017). Each LNG

Canada partner (Shell, Petronas, PetroChina, Kogas, and

Mitsubishi) is responsible for allocating their own share of

LNG, which meant the project did not need to sign up

third-party buyers to proceed.

1|PEAK LNG FID

In total, 2019 could see as much as 60 mn mt/y approved,

with Golden Pass in the United States, Nigeria’s NLNG

7 and Total’s Papua New Guinea expansion already effec-

tively given the go-ahead in the first few months of the year.

The year’s biggest expansion is likely to be from Qatar

Petroleum, which has plans to add 44 mn mt/y, bringing

total Qatari export capacity up to 110 mn mt/y. The project

will begin with three new mega-trains of 7.8 mn mt/y each,

with first LNG deliveries penciled in for 2023. This project

will have the lowest cost gas of any planned LNG supply

additions globally, setting a tough competitive benchmark.

The biggest project in the pipeline outside Qatar and the

United States is Arctic LNG 2 in Russia, with 19.8 mn mt/y

capacity. In May 2018, Total bought a 10% stake in the pro-

ject from Novatek (in which it holds a 19% stake). Total also

partners with Novatek through a 20% share in the Yamal

LNG plant, which is situated across Russia’s Ob estuary

from Arctic LNG 2. The project comprises three liquefaction

trains of 6.6 mn mt/y capacity each, and has already signed

supply and finance deals with Asian customers and banks.

Saudi Aramco is currently in negotiations to take a stake in

the project.

Another project recently given the go-ahead is BP’s Tor-

tue floating LNG plant off West Africa, which will start at

2.4 mn mt/y, expanding up to 10 mn mt/y. By using floating

storage and regasification units (FSRUs) and FLNG vessels,

smaller projects of this sort can start bringing in revenue

quickly, making it easier to secure finance.

In the United States, Shell and Exxon appear ready to

move forward with Golden Pass. But some other US pro-

jects, including Magnolia and Lake Charles, look like being

delayed due to a lack of firm long-term purchase commit-

ments. When long-term contracts have been signed, pricing

is competitive—reflecting the wide potential choice of low-

cost suppliers and a growing inclination among many buyers

to opt for shorter term and more flexible purchase

arrangements.

How to cite this article: Go-ahead for liquefied

natural gas projects as developers eye widening mid-

2020s supply gap. Oil and Energy Trends. 2019;44:

14–15. https://doi.org/10.1111/oet.12680

DOI: 10.1111/oet.12680

14 © 2019 John Wiley & Sons Ltd wileyonlinelibrary.com/journal/oet Oil and Energy Trends. 2019;44:14–15.