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Released January 14, 2016 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Reflecting a drop a year earlier, oil prices plunged in fourth-quarter 2015, prompting questions regarding the future of planned natural-gas related investments by big energy companies. The price drop in fourth-quarter 2015 wasn't as big as the one in the same quarter a year earlier, but it still left companies reeling.
Click on the image at right for a graph detailing active North American natural gas project kickoffs in first-half 2016.
While North America saw many projects move forward to completion in 2015--and even well production was over levels in 2014, with half the drilling rigs in the field--2016 will most likely not see the same level of optimism when it comes to investments. Most of 2015's projects were already well-planned and needed for upcoming capacity, whereas projects for 2016 were in early planning--considered as "phase II"--or were expansions. Consequently, if sales and profits came through for the initial investment, and the price of oil continued to creep up, then maybe more investment would be appropriate. Unfortunately, that is not what happened.
Strategy meetings will determine which projects, if any, will go through for the calendar year of 2016. Some will be deferred to 2017-2018, while others could see the chopping block. For the first half of 2016 in North America, 60 projects are planned to start construction, with an overall investment value of $57 billion. Obviously, dirt will not be moved this year on all of the projects, but some will proceed. Louisiana and Texas have the largest project counts with 14 and 15, respectively. These projects represent $16.8 billion worth of investment, or close to a quarter of the planned overall spending. Half the projects are planned for the Southwest with 29 projects set to kick off. Western Canada has 13 projects planned with an estimated investment of $29 billion.
Some projects that will most likely be postponed or put on hold are the multi-billion dollar gas-to-liquid (GTL) plants, such as EmberClear's (Calgary, Alberta) Natchez, Mississippi facility and Wyoming GTL's (Washoe Valley, Nevada) Cheyenne facility. These projects are just not feasible with the price of oil so low.
Projects that have a good chance to proceed will be some of the liquefied natural gas (LNG) facilities, which are planned for export and already have tolling agreements in place. Trunkline Gas Company LLC's (Houston, Texas) Lake Charles LNG project in Louisiana) has a tolling agreement with BG Group Plc (Reading, England) (acquired by Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) in 2015). Magnolia LNG LLC (Lake Charles, Louisiana) has tolling agreements in place for its Lake Charles LNG export facility, although it might move the construction kickoff to the fall of 2016. Southern LNG's (Birmingham, Alabama) Elba Island LNG export plant in Georgia has signed offtake agreements with Shell. A majority of these projects have a construction start dates in April through June, so there is still time for these companies to review their investment plans.
With analysts predicting a further drop in oil prices to $20 a barrel, and some even foresee $10 a barrel, a lot more sectors will feel the impact than just oil and gas.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Click on the image at right for a graph detailing active North American natural gas project kickoffs in first-half 2016.While North America saw many projects move forward to completion in 2015--and even well production was over levels in 2014, with half the drilling rigs in the field--2016 will most likely not see the same level of optimism when it comes to investments. Most of 2015's projects were already well-planned and needed for upcoming capacity, whereas projects for 2016 were in early planning--considered as "phase II"--or were expansions. Consequently, if sales and profits came through for the initial investment, and the price of oil continued to creep up, then maybe more investment would be appropriate. Unfortunately, that is not what happened.
Strategy meetings will determine which projects, if any, will go through for the calendar year of 2016. Some will be deferred to 2017-2018, while others could see the chopping block. For the first half of 2016 in North America, 60 projects are planned to start construction, with an overall investment value of $57 billion. Obviously, dirt will not be moved this year on all of the projects, but some will proceed. Louisiana and Texas have the largest project counts with 14 and 15, respectively. These projects represent $16.8 billion worth of investment, or close to a quarter of the planned overall spending. Half the projects are planned for the Southwest with 29 projects set to kick off. Western Canada has 13 projects planned with an estimated investment of $29 billion.
Some projects that will most likely be postponed or put on hold are the multi-billion dollar gas-to-liquid (GTL) plants, such as EmberClear's (Calgary, Alberta) Natchez, Mississippi facility and Wyoming GTL's (Washoe Valley, Nevada) Cheyenne facility. These projects are just not feasible with the price of oil so low.
Projects that have a good chance to proceed will be some of the liquefied natural gas (LNG) facilities, which are planned for export and already have tolling agreements in place. Trunkline Gas Company LLC's (Houston, Texas) Lake Charles LNG project in Louisiana) has a tolling agreement with BG Group Plc (Reading, England) (acquired by Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands) in 2015). Magnolia LNG LLC (Lake Charles, Louisiana) has tolling agreements in place for its Lake Charles LNG export facility, although it might move the construction kickoff to the fall of 2016. Southern LNG's (Birmingham, Alabama) Elba Island LNG export plant in Georgia has signed offtake agreements with Shell. A majority of these projects have a construction start dates in April through June, so there is still time for these companies to review their investment plans.
With analysts predicting a further drop in oil prices to $20 a barrel, and some even foresee $10 a barrel, a lot more sectors will feel the impact than just oil and gas.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
