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Sector analysis
LNG liquefaction growth – changing of the guard Read any of the recent reports published on energy trends and they point to the important role that gas will have to play in the energy transition to meet future energy needs and climate targets. Gas demand continues to increase and 2018 figures produced by the EIA show that demand for natural gas increased by 4.6%. Projections also show that significant growth in gas demand is expected between 2018 and 2024 driven most notably by China, the Middle East, the US, India and wider Asia Pacific market. While piped gas and domestic production can meet some of these increases, the LNG industry will play a critical role in meeting global market demands. While the demand centres will remain the same the main producing countries producing LNG will change. Australia has this year surpassed Qatar as the number one producer of LNG. However, what we will see between now and 2024 is the USA becoming the number one market for LNG liquefaction capacity. So far in 2019 we have seen two LNG liquefaction projects reach a final investment decision, Train 6 at Sabine Pass, and the greenfield development of Golden Pass. It is what is projected that is exciting and will offer significant opportunities for the supply chain.
Overall the US has a total of 36 projects that are at varying stages of the development process, if they all proceed this will lead to a staggering 314 mtpa of liquefied gas hitting the markets, representing almost 50% of the total capacity that is being proposed for development. During 2019 and 2020 the projections are that we could see a further 14 LNG liquefaction plants reach FID. Of these 14 developments, 13 are greenfield projects. Gas Sales Agreements are in place for some of these projects, while others are seeing GSAs being agreed.
Neil G
olding
While some of the LNG will find its way into the Asia Pacific market, it will be competing with Australia, Papua New Guinea and Canada for future market share. The trade war with China could also see some of the proposed developments being impacted, as finance was to be provided by Chinese players and the country had been considered a potentially significant market for the LNG. Only time will tell if this trade war will impact on the development of some of these future projects in the USA. However other options are available for the gas and Europe is looking to diversify its feedstock away from over reliance on Russia and will take a share of future LNG production. Venture Global LNG has signed an agreement with BHGE that will see the company supply 60 mtpa of standardised modular liquefaction trains. The trains, which will each have a capacity of 1 mtpa, will be factory fabricated, rather than constructed onsite, and will be installed at Venture Global’s Calcasieu Pass and Plaquemines LNG projects. This process will eventually lead to cost savings, a quicker time to first production and less downtime during the maintenance process. A first of its kind development will also be seen offshore in the Gulf of Mexico. An offshore platform liquefied natural gas (PLNG) complex will be constructed as part of a Sino-US Integrated Solution. The PLNG combines fixed platform technology with LNG factory design. The project will comprise of five LNG storage platforms, six liquefaction platforms, one accommodation platform, one utilities platform, one gas arrival platform, one flare platform and one loading platform – all of which will be bridge linked, plus onshore facilities and pipelines. The series of facilities are set to be installed in the West Delta area, 16km offshore the US Gulf of Mexico and is designed to have an annual LNG production and storage capabilities of up to 4.2 mtpa. Whether this project will be impacted by the China-US trade war waits to be seen. With the US currently the largest producer of oil globally and set to become the largest exporter of LNG liquefaction in the next four years we will see the US being the dominant market force in the energy industry in the coming decades. Neil Golding Head of Oil & Gas and Business Development neil.golding@the-eic.com
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