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Forecast for US LNG riddled with questions

Thu 22 Nov 2018 by Jamey Bergman

Forecast for US LNG riddled with questions
Norton Rose Fulbright partner Nick Rowse: "There are a lot of projects planned, but the key question for the gas industry is ‘Do we need all of those?’

“How big is the world’s LNG market?” is just one of the seemingly dozens of questions Norton Rose Fulbright Partner Nick Prowse ventured as he spoke about the potential direction of the market and the role the recent flood of gas from US shale projects is playing in it.

Current world LNG liquefaction capacity is 40.9Bn CFD, he told the LNG World Shipping Ship/Shore Interface Conference in London.

Current demand is estimated at 75Bn CFD, but by 2040, the demand could extend well beyond 100Bn CFD.

“How long will the world be taking and using LNG?" Mr Prowse mused. "I don’t think anyone knows the answer to that question, and I think … lots of people should.”

"There are a lot of projects planned, but the key question for the gas industry is ‘Do we need all of those?’ he asked.

The answer?

"Only time will tell over the next 20 years. Once you take an FID, you’re investing vast amounts – US$50-something billion – and the question is, ‘How long will the world be taking and using liquefied natural gas? This really is the essential question. ‘How much is there, really?’

"And do you end up over the next 20 years, if you don’t move now, being displaced by other projects, and do you, as a host nation, end up leaving your gas in the ground?"

Only time will tell, he said again.

New LNG trains are coming online quickly in the US and its natural gas exports in the first half of 2018 were more than double the 2017 average.

“For the first time, the US has ended up as a net exporter of gas,” Mr Prowse said.

What we do know for sure is that there is a vast amount of gas that can potentially still be produced from the US. And a vast amount of gas that will be produced.

"It will come out of the ground," Mr Prowse said. "The question is, ‘where will it go?’ Will it stay in the US market, will it make its way as LNG to international markets?

Mr Prowse said the world is witnessing a fundamental step-change by the US authorities to try and help their producers access the world’s global gas markets.

The US Federal Energy Regulatory Commission (FERC) has now signalled it will speed up its processes. And the US Department of Energy (DOE) has done an economic analysis and decided to lift any form of cap on LNG production coming out of the US.

"So a whole load of things are going on in the US with the FERC and the DOE to try and speed up the process and help LNG exports and help this plethora of potential new projects to access global gas markets," he said.

"But at the same time they’re taking a step back on permitting for pipeline infrastructure in the US. They took a slight step back on some tax issues. And … we’ve got the sort of trade war type issues going on that may mean that Chinese entities are less likely to invest in liquefaction plants in the US," Mr Prowse said.

In other words, only time will tell.

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