Like all industrial endeavours, the LNG sector waxes and wanes. Expansion has come in fits and starts, at the mercy of geopolitics, financial markets, competing energy sources, trade wars, environmental initiatives and natural phenomena. As a result of the complex interplay between these factors, aligning LNG supply with demand poses challenges.
The good news for all involved with, and benefiting from, LNG is that the onwards and upwards trend in trade growth is inexorable. The clean-burning characteristics of natural gas, coupled with plentiful supplies and competitive pricing, mean it is currently the fossil fuel of choice in most markets.
The International Gas Unionís recently published 2018 World LNG Report points out that the 12% increase in worldwide movements of LNG in 2017, to a record-breaking 293.1M tonnes, is the highest annual growth in the sector since 2010.
As of March 2018, there was 369 mta of LNG liquefaction capacity in place, with another 92 mta under construction. Backing that up is another 875 mta of proposed capacity tabled and under study and development.
Most of the final investments decisions (FIDs) for the LNG projects now coming onstream were taken during 2012-14, a time when recovering economies were planning on significant increases in energy consumption. The collapse in energy demand and prices that soon followed resulted in a rapid slide in investments in new projects.
Only one LNG export scheme achieved a final investment decision in 2017, Eniís 3.4 mta Coral floating LNG production initiative for the coastal waters of Mozambique. Similarly, only one FID has been made so far in 2018, by Cheniere Energy for the 4.5 mta Train 3 of its Corpus Christi terminal in Texas.
The knock-on effects of the current slowdown in commitments to new projects will be felt in 2021-22, when the volume of new liquefaction capacity coming onstream will be minimal.
The current global demand for LNG is strong and looks set for continued buoyancy. At the same time some of the gas fields feeding long-established LNG export plants are in decline. All are agreed that new FIDs will have to be taken soon to prevent a severe LNG supply shortfall in the first half of the next decade.
As indicated, there is no shortage of proposed new LNG schemes on the table. Fortunately, many project developers are close to achieving the volume of sales contracts necessary to support a FID. These successes will help meet industry aspirations for a steadier, less fractious expansion in global LNG trade.
If the construction of 200 mta of new LNG production capacity by 2025 is a reasonable goal, the following will help achieve it. Targeting FIDs in 2018 are Shell and its partners in LNG Canada, the four-train, 26 mta project in British Columbia, and Gazprom for a third train, of 5.4 mta, at the Sakhalin 2 terminal in eastern Russia.
Another possible project approval this year is that for export facilities at the Golden Pass LNG import terminal in Texas. Of all the proposed US export projects currently on the table, Golden Pass has notable advantages, not least the financial clout of the schemeís promoters, Qatargas and ExxonMobil, and the five storage tanks and two marine jetties already in place at the terminal. The Golden Pass project calls for three trains, each of 5.2 mta.
Following on, in 2019, FIDs are promised for several major initiatives, including Anadarko for its 12 mta Mozambique LNG development; Driftwood LNG for a 27.6 mta plant near Lake Charles, Louisiana; Novatek for its 18.3 mta Arctic LNG 2 facility; and Qatargas for three new trains totaling 23 mta at Ras Laffan.
Even if the early FIDs are only for the initial phases of the projects in question, the ball is set to start rolling again.