February 2020

Trends and Resources

Business Trends: Global LNG projects to compete with pipeline gas

Expanding LNG supply worldwide will continue to dominate the changing landscape of the natural gas industry and gas trade. By 2040, LNG is expected to account for more than 15% of global gas consumption, after overtaking interregional pipeline deliveries in the late 2020s.

Blume, Adrienne, Nichols, Lee, Hydrocarbon Processing Staff

Expanding LNG supply worldwide will continue to dominate the changing landscape of the natural gas industry and gas trade. By 2040, LNG is expected to account for more than 15% of global gas consumption, after overtaking interregional pipeline deliveries in the late 2020s (Fig. 1).

FIG. 1. Gas trade by supply source, 2017–2040. Source: BP.
FIG. 1. Gas trade by supply source, 2017–2040. Source: BP.

The expansion of LNG trade will lead to a more integrated and competitive global market for the fuel. Within individual nations, greater integration of regional gas markets is helping coordinate production and demand. This phenomenon is especially prominent in the U.S., where gas processing and transport infrastructure is expanding into major shale gas production areas, paving the way for the further development of multiple supply hubs.

However, the worldwide scale of expansion will depend on the viability and timing of investments in new capacity. LNG investments are made in cycles, bringing “waves” of new capacity to the market within spans of 4 yr–5 yr. This uneven growth in supply has contributed to periods of volatility in LNG markets worldwide. Greater competition will be seen between LNG and pipeline gas supplies, especially in the mega-importing centers of Europe and China.

Consumption

In 2018, the LNG market expanded by 8.3% to 313.8 MMt, according to the International Group of Liquefied Natural Gas Importers (GIIGNL). New supply volumes came primarily from the U.S., Australia and Russia, while China accounted for around 50% of the world’s LNG import growth. Of the total volume, 52% was delivered to Asia, 28% was sent to the Americas, 13% went to Europe and the Middle East received 7%. Asia’s LNG imports increased 13% in 2018 to 238.6 MMt, while Europe imported 6.4% more LNG on the year at 48.9 MMt.

The International Energy Agency (IEA) expects a 30% increase in global LNG exports from 2018–2023, and a corresponding uptick in LNG imports worldwide to 505 Bm3 from 391 Bm3 in 2018.

Asia will remain the biggest market for LNG imports over the next two decades, although the demand momentum will shift from the mature markets of Japan and South Korea to the emerging markets of China and India. By 2040, the latter two countries are expected to consume approximately 50% of the world’s LNG (Fig. 2). Europe, meanwhile, will remain a key balancing market for global gas trade and a hub for both LNG and pipeline gas imports.

FIG. 2. LNG imports and exports, 2017–2040. Source: BP.
FIG. 2. LNG imports and exports, 2017–2040. Source: BP.

LNG PROJECT DEVELOPMENTS

DNV GL expects global LNG export capacity to increase by 45% between 2017 and 2022, to more than 400 metric MMtpy, with 90% of the new capacity coming from sanctioned projects in the U.S. and Australia. By 2050, the classification society expects this capacity to exceed 700 MMtpy (FIG. 3). Regasification capacity is anticipated to increase even more sharply (Fig. 4).

FIG. 3. Global LNG export capacity forecast by region, 1980–2050. Source: DNV GL.
FIG. 3. Global LNG export capacity forecast by region, 1980–2050. Source: DNV GL.
FIG. 4. Global LNG regasification capacity forecast by region, 1980–2050. Source: DNV GL.
FIG. 4. Global LNG regasification capacity forecast by region, 1980–2050. Source: DNV GL.

Concerns exist about supply and infrastructure after 2022. According to the Gas Exporting Countries Forum, around $8 T needs to be invested in upstream and gas transport infrastructure by 2040, with approximately $500 B of this investment coming from liquefaction, regasification, pipeline and shipping projects. Investments will need to be made in 2020 to ensure that gas demand can be met after 2025.

As of 2019, a total LNG export capacity of 406 MMtpy was in place in 20 countries around the world. Global liquefaction capacity increased by 41 MMtpy in 2018. At the end of the year, around 66 MMtpy of new liquefaction capacity was under construction, of which 53 MMtpy was in North America. Approximately 25 MMtpy of new liquefaction capacity was expected to come online in 2019, of which 21 MMtpy was anticipated to start up in the U.S.

Conversely, LNG regasification capacity is approximately 868 MMtpy in 42 countries worldwide, as of 2019. Ten new LNG import terminals were commissioned in 2018, adding 22.3 MMtpy of new regasification capacity.

Gulf Energy Information’s Energy Web Atlas and Hydro-carbon Processing’s Construction Boxscore Database are tracking more than 420 active gas processing/LNG projects around the world. Nearly 70% of these projects are for the construction of LNG infrastructure—regasification, liquefaction, bunkering, etc. Nearly half of the world’s active LNG projects are in the Asia-Pacific region. The following are major active downstream projects/initiatives by region.

Africa

The region is continuing to develop mega-sized natural gas reserves offshore. In turn, midstream and downstream operators are investing in new natural gas pipeline and gas processing infrastructure, as well as the construction of new LNG export/ import terminals and FLNG and floating storage and regasification unit (FSRU) vessels.

Egypt. Due to mega-offshore natural gas discoveries (e.g., the 30-Tcf Zohr field) and increasing onshore production, Egypt is in the process of regaining its momentum as an LNG exporter. After the Arab Spring, a natural gas deficit caused rolling blackouts throughout the nation, forcing the country to import natural gas for power generation. However, additional natural gas supplies from offshore/onshore fields and natural gas production from Cyprus, and possibly Israel, are helping satisfy increasing domestic demand, as well as fueling new supplies to the country’s existing LNG export terminals—Damietta and Idku.

Mozambique/Tanzania. Both countries are developing massive offshore natural gas reserves in the Rovuma Basin. These plans also include the development of domestic LNG export infrastructure, including the use of an FLNG vessel. In Mozambique, two onshore LNG export terminals and one FLNG vessel are planned to process offshore natural gas production. The two onshore terminals are being developed by Anadarko and a JV between Eni and ExxonMobil. Both facilities will be in the Cabo Delgado province. Anadarko’s $20-B, 12.88-MMtpy facility will consist of two liquefaction trains. ExxonMobil and Eni are planning a $30-B, two-train, 15-MMtpy facility.

In 2017, Eni greenlighted the development of natural gas assets offshore Area 4 of the Rovuma Basin. To process natural gas production, Eni will utilize a 3.4-MMtpy FLNG vessel. The $8-B Coral LNG project will include drilling and production, as well as the use of an FLNG vessel attached to six subsea wells, with all natural gas supplies sent to BP.

Tanzania is planning to start building its own LNG export facility in 2022. The $30-B, 10-MMtpy facility is being developed by several shareholders, including Equinor, Shell, ExxonMobil, Ophir Energy and Pavilion Energy. The two-train facility will be in the southern Lindi region and will process natural gas from the mega-offshore Rovuma Basin. At the time of this publication, the LNG export terminal is scheduled to be completed in 2028.

Nigeria. Nigeria LNG has greenlighted the expansion of the Bonny Island LNG terminal. The six-train, 22.5-MMtpy facility will increase total LNG production capacity to more than 30 MMtpy. The project includes the construction of a seventh liquefaction train—with a capacity of 4.2 MMtpy—and the debottlenecking of the plant’s six trains, which will add approximately 3.4 MMtpy of liquefaction capacity. The project is scheduled to be completed in 2024.

Mauritania/Senegal. The two countries are working together on the Greater Tortue project. Led by BP, the project was greenlighted in December 2018. The $1.3-B project will utilize a 2.5-MMtpy FLNG vessel to import offshore natural gas production for power generation. The vessel is expected to begin operations in 2022.

MoroccoThe country is investing $4.5 B in a gas-to-power project. The project, located in Jorf Lasfar and intended to reduce natural gas imports from sole provider Algeria, includes the construction of an LNG jetty, terminal, regasification unit and pipelines. Starting in 2025, the project will enable Morocco to import up to 7 Bm3y of natural gas.

Asia-Pacific

Asia consumes more than half of the world’s LNG. The region imported 322.9 Bm3 of LNG in 2018—a 13.5% increase on the year. China and India’s presence in the LNG market has grown substantially over the last several years and will continue to shape LNG trade as demand, especially for power generation, increases.

Additional natural gas infrastructure will provide countries in the region with additional feedstock to fuel increasing power generation needs and heating. Numerous LNG export and import terminals are planned, as well as natural gas processing centers and thousands of miles of new pipeline infrastructure.

China. One of the major initiatives of China’s Blue Sky Defense plan is converting coal-fired power plants to run on natural gas. The country’s natural gas consumption more than tripled over the past decade.

According to BP, China’s natural gas consumption has increased from nearly 82 Bm3y in 2008 to approximately 283 Bm3y in 2018. Within the same timeframe, China’s domestic natural gas production reached nearly 162 Bm3y. Due to the wide gap between supply and demand, China is dependent on natural gas imports.

As the Chinese government is adamant on significantly increasing natural gas as part of the total energy mix to 10% in 2020 and to 15% in 2030, the gap between production and demand will continue to widen.

According to the Energy Web Atlas, China has 19 operational LNG receiving terminals, with a total installed capacity of 62 MMtpy. Since 2015, the nation’s LNG imports have tripled to nearly 55 MMtpy, and forecasts show it could increase to 80 MMtpy by 2025.

To prepare for the significant increase in natural gas demand, China is investing heavily to boost LNG import and natural gas storage capacity. At the time of this publication, the Energy Web Atlas is tracking six additional grassroots LNG import terminals under development, which would add more than 16 MMtpy of LNG capacity by the early 2020s. In addition, expansions are planned for the storage capacity of nearly all operational domestic LNG terminals.

India. India has ambitious plans to significantly increase natural gas as part of the country’s total energy mix. The country is targeting an increase in the share of natural gas in its total energy mix from 6.5% to 15% by the early 2020s. This development plan includes the construction of LNG import infrastructure and the completion of new natural gas distribution networks to nearly 230 cities. India will invest more than $10 B to expand its domestic natural gas distribution network.

At the time of this publication, India has four operational LNG import terminals, with an installed capacity of 30 MMtpy. These terminals are located at Dahej, Hazira, Kochi and Ratnagiri. Billions of dollars of investment could increase India’s domestic LNG receiving capacity to approximately 56 MMtpy by the mid-2020s.

Additional Asian LNG projects. Due to rapidly declining domestic natural gas production, Thailand plans to invest in additional import infrastructure to satisfy increasing demand for natural gas, which is needed since approximately 70% of the nation’s power supply is gas-fired. PTT has announced plans to invest more than $11 B by 2023 to build Thailand’s LNG value chain and become an LNG hub in the region. The program calls for LNG imports to increase from nearly 3 MMtpy in 2016 to approximately 36 MMtpy by 2030.

At present, the country has only one import terminal at Map Ta Phut. Plans call for the 10-MMtpy import terminal to be expanded by 20 MMtpy over the next decade. Another 5-MMtpy terminal is slated for Rayong province by the early 2020s.

Two FSRU vessels have also been proposed in Rayong. Gulf MPT LNG Terminal Co. plans to invest more than $1.3 B to build a gas port and a 5-MMtpy LNG terminal on the country’s east coast. A second phase could increase the LNG terminal’s capacity to nearly 11 MMtpy, if needed.

Due to the country’s geography, Indonesia is both an LNG importer and exporter. Over the next several years, Indonesia plans to increase LNG capacity via floating vessels and land-based terminals. BP plans to start up Train 3 at its Tangguh LNG terminal in 3Q 2021. Train 3’s completion date is one year behind schedule due to natural disasters across Indonesia that delayed shipments of crucial equipment to build the production line. Train 3 will have a capacity of 3 MMtpy. Once completed, the terminal’s total capacity will reach approximately 11.4 MMtpy.

The country’s most capital-intensive LNG investment is Inpex’s $19-B Abadi LNG project. FID will be taken for the 9.5-MMpty, land-based LNG terminal in 2022/2023, with completion set for 2027/2028.

In Papua New Guinea, ExxonMobil and Total plan to expand the existing PNG LNG terminal. The more than 8-MMtpy project would add three additional liquefaction trains, each with a capacity of 2.7 MMtpy. If built, the $13-B project would double the nation’s LNG exports.

Although Australia is the largest LNG exporter in the world, it needs additional natural gas imports since the Australian government has barred onshore natural gas drilling. Almost all the produced natural gas is destined for export via LNG, primarily to Asia-Pacific customers. This paradox has led to the announcement of several LNG import terminals to supply the nation with natural gas. Those projects are being developed by Australia Industrial Energy, EPIK Co. Ltd., AGL Energy, ExxonMobil and Venice Energy.

Due to declining production from the country’s Malampaya gas field, the Philippines plans to install new LNG import terminals to provide natural gas feedstock to gas-fired power generators. These projects include the FGEN Batangas LNG terminal, the Tanglawan LNG hub, the Pagbilao Grandes Island LNG terminal and the Luzon FLNG terminal, as well as proposals from New Fortress and Pertamina to build regasification facilities—floating vessels and/or land-based structures—to fuel new gas-fired power plants.

Vietnam is also investing in several gas-to-power projects. These facilities include the construction of an LNG import/regasification terminal, along with a gas-fired power plant. Several companies—Korea Gas Corp. and Energy Capital Vietnam, Novatek, PetroVietnam Gas Corp. and Marubeni—have announced development plans worth more than $4 B.

Canada

Most of Canada’s capital expenditures have been for proposed LNG export terminal projects. However, due to high investment costs, government delays, failed/slow negotiations with First Nations, public protest, etc., the region has witnessed a significant drop-off in active LNG projects over the past several years.

Although many Canadian projects are at a standstill, some capital-intensive projects are progressing. These projects include the Bear Head LNG, Goldboro LNG, Kitimat LNG and LNG Canada projects, among others.

Russia

With large-scale natural gas production in Russia, the country is investing heavily to boost LNG export infrastructure. Russia has two LNG export terminals in operation—the $27-B, 16.5-MMtpy Yamal terminal and the 10-MMtpy Sakhalin-2 terminal.

However, by 2025, the country plans to add a significant amount of new export capacity. The Energy Web Atlas is tracking the following projects: Yamal LNG Train 4, Arctic LNG-2, Ust-Luga LNG, Vysotsk LNG, Far East LNG, Kuril Islands LNG and Sakhalin-2 LNG Train 3.

Middle East

Although the Middle East is one of the world’s largest oil and gas producing regions, it is also a rising LNG importer. Regasification projects have been undertaken in several nations.

According to BP, Kuwait’s natural gas production has increased from 9.6 MMtpy in 2010 to 15 MMtpy in 2018. However, the nation’s consumption rates have surged from 12 MMtpy to 18.7 MMtpy within the same timeframe.

To close the gap between natural gas supply and demand, Kuwait National Petroleum Corp. is building the $3.6- B Al-Zour Import Terminal project. The 11-MMtpy LNG import terminal will consist of a regasification facility, eight LNG storage tanks, marine jetties and berthing facilities. The terminal is scheduled to begin operations in 2021.

To help mitigate a natural gas supply deficit, Pakistan greenlighted five consortiums to develop additional LNG import terminals in the country. The Pakistani government has announced an ambitious plan to boost LNG imports to 14 MMtpy by the early 2020s and up to 21 MMtpy by the mid-2020s. The five consortiums include Tabeer Energy; Energas and ExxonMobil; Trafigura; Engro and Shell; and Gunvor and Fatima.

The country’s third LNG import terminal will be in Karachi and will utilize an 600,000-ft3d FLNG vessel. A proposed fourth LNG terminal, if greenlighted, is expected to begin operations in 2021. The additional natural gas supplies will help Pakistan satisfy increasing natural gas demand for power and fertilizer production.

After positive results from new appraisal wells, Qatar announced plans to boost domestic LNG production capacity to 126 MMtpy by 2027. The country’s original initiative called for total domestic LNG production to reach 110 MMtpy by 2024; however, new appraisal wells in the country’s North Field showed enough reserves to increase LNG production.

U.S.

Due to increased domestic shale gas production, the U.S. has witnessed a gas processing and LNG terminal building boom. Over the past several years, millions of cubic feet per day of additional gas processing capacity have begun operations. In turn, billions of dollars have been invested to build and/or expand natural gas pipeline infrastructure. These investments include thousands of miles of domestic pipeline capacity builds, as well as billions of dollars of new pipeline infrastructure to export U.S. shale gas to northern and central Mexico.

The largest capital investments are seen in the development of U.S. LNG liquefaction and export terminals. At the time of this publication, the Energy Web Atlas and the Construction Boxscore Database were tracking more than 30 LNG export projects under development in the U.S. (FIG. 5).

FIG. 5. U.S. LNG export projects under development. Source: Hydrocarbon Processing’s Construction Boxscore Database, the Energy Web Atlas and the U.S. Department of Energy.
FIG. 5. U.S. LNG export projects under development. Source: Hydrocarbon Processing’s Construction Boxscore Database, the Energy Web Atlas and the U.S. Department of Energy.

These projects represent more than 400 MMtpy of LNG export capacity at a cost of more than $260 B. By 2022, approximately 71 MMtpy of new LNG export capacity will be operational in the U.S. This capacity includes new liquefaction trains at:

  • Sabine Pass (22.5 MMtpy)
  • Cameron LNG (13.5 MMtpy)
  • Freeport LNG (13.2 MMtpy)
  • Cove Point LNG (5.75 MMtpy)
  • Corpus Christi Liquefaction (13.5 MMtpy)
  • Elba Island Liquefaction (2.5 MMtpy).

This LNG export terminal capacity buildout will propel the U.S. to become the third-largest LNG exporter in the world, behind Australia and Qatar. Should the U.S. develop multiple LNG projects within a second wave of terminal startups, the U.S. could surpass Australia and Qatar as the world leader in LNG export capacity. HP

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