HOUSTON -- At LNG 17s Wednesday spotlight session on
The Global Outlook for LNG, Cambridge Energy
Research Associates (CERA) Chairman and award-winning author
Daniel Yergin discussed how the LNG industry in North America
and around the world has evolved and continues to change.
LNG 17 is the 17th incarnation of the global LNG
industrys premier conference and exhibition, which makes
its Houston debut from April 1619 at the George R. Brown
The map of LNG is being redrawn, and you are the ones who
are redrawing it, Mr. Yergin said, addressing the
audience. The US was destined to be a major importer of
LNG, but things have really turned around with the advent
of the shale gas boom in North America.
Also, the US is home to some of the most important
technologies shaping this industry, Mr. Yergin
Mr. Yergin posed many questions to the assembled crowd,
including What is shale gas isnt just a North
American phenomenon? as well as what might happen in the
scenario of a gas export surplus. In the latter case,
Would traditional pricing relationships break down?
Mr. Yergin posited.
An important part of LNG 17 is to answer the question, To
what degree will the LNG industry be reshaped by these
events and scenarios, Mr. Yergin said.
Mr. Yergin also spoke of the strong potential for gas to
increase in importance as a transportation fuel and as a source
of electricity generation, although he noted that competition
from low-cost coal in the power sector will be formidable.
Overall, however, Mr. Yergin said, We are optimistic for
the global gas market, with 620 billion cubic feet per
day (Bcfd) of demand forecast for 2040.
According to Mr. Yergin, one of the greatest risks for the LNG
export industry is localizationi.e., the development of
local gas resources reducing import demand from major
producers. Cost, which Mr. Yergin called the
Achilles heel of LNG development, poses additional
challenges. The cost of developing a greenfield LNG terminal
has doubled or even tripled since 2005, according to Mr.
Yergin, and this will become an increasing focus of discussion
in the US and Canada.
In the US, at least 30 LNG export applications have been
submitted for review, although only a few of these plants will
be built, Mr. Yergin acknowledged. The major market constraint
in North America is demand, not supply. Whether or not the
supply chain will be able to deliver is a question of equipment
and personnel, he said.
However, high development costs could deter investors long
before Henry Hub gas prices increase, the CERA chairman warned.
People will not casually commit to such high-cost projects, said Mr. Yergin,
adding that IHS Inc. (of which CERA is a part) foresees 8 Bcfd
of North American LNG exports by 2030, although this number
The North American gas industry will change the LNG business
model to some degree, Mr. Yergin noted in the conclusion to his
speech, whether it is through the price of feedstock (i.e., shale gas) or LNG
export pricing. This will stimulate new pricing benchmarks at
the same time as countries in the Middle East and the
Commonwealth of Independent States (CIS) work to establish
Henry Hub will establish a different, but not necessarily
lower, pricing system against which others will have to
compete, Mr. Yergin said.
Blume, Managing Editor