LNG Sector Holding up in Wartime, Shell Finds

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

The global LNG sector was able to adjust relatively well to the supply-side disruptions stemming from conflict in the Middle East. North America is helping to lead the way.

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LNG is Resilient

The conflict in the Middle East has created widespread supply shocks across the energy sector, but the global liquefied natural gas (LNG) industry has shown its ability to withstand the pressure, Shell said in a report on Thursday.

"The ramp up of new liquefaction facilities in North America, improved performance at existing plants and slower Asian imports of LNG have partially offset the impact of reduced supply from the Middle East," Shell's report read.

The United States, the world leader in exports of LNG, helped support global energy security during the initial stages of the Russian invasion of Ukraine in 2022, when global sanctions on Moscow curtailed its ability to send natural gas to European economies.

With war raging in the Middle East, several liquefaction units, or trains, in Qatar were knocked offline by Iranian missile strikes in March. Some 12.8 million tons of LNG per year may be offline for as long as five years due to damage that could cost QatarEnergy US$26 billion to repair.

Industrial Info Resources data show those 12.8 million tons represent almost 20% of the 77 million metric tons per annum (MTPA) of LNG export capacity from the overall Ras Laffan North and Ras Laffan South facilities.

Cederic Cremers, the president of integrated gas at Shell, said the Middle East conflict created a "system-wide shock" across all segments of the global economy, but the LNG industry proved to be resilient.

"While more investment in both supply and demand infrastructure is needed, the long-term outlook remains strong and LNG will continue to be a stabilizing force in the global energy system," he said.

About 20% of the world's LNG supply is stranded behind the Strait of Hormuz, Shell estimated. Before the conflict began in late February, Shell was expecting a substantial increase in LNG trade this year, but now says levels could be similar to last year, assuming the Strait opens completely this summer.

"About 180 million metric tons of annual new supply is forecast to enter the market by 2030, improving the availability and affordability of gas and opening up demand in new markets.," Shell found.

North America in an Expansion Phase

The LNG sector across North America in particular is in the midst of a growth spurt. IIR Energy in its NATGAS Today report for Tuesday noted that four of the operational export terminals along the U.S. Gulf Coast are busy with expansion efforts. The largest would be from trains 19-36 at the Plaquemines terminal, operated by Venture Global. Expansions would add another 1.96 billion cubic feet per day to feed gas capacity for LNG.

Canada, meanwhile, is pressing forward with efforts to expand LNG exports from the Pacific Coast, with Prime Minister Mark Carney putting the second phase of the LNG Canada project on his list of national priorities.

LNG Canada is the only facility in North America that can deliver gas from the Pacific Coast.

Meanwhile, data from Industrial Info Resources show six projects, from compressor stations to pipeline additions, behind the Woodfibre LNG export facility that combine for US$5.5 billion in investments. The project needs a 29.2-mile, 24-inch diameter pipeline for ultimate completion, which is expected to carry 200 million cubic feet of natural gas per day. It should be ready by early next year.

The Ksi Lisims project secured backing from aboriginal communities earlier in June, helping it on its way to the finish line as well.

By the Numbers

• 1.96 Bcf/d in additional feed gas coming for Plaquemines LNG
• US$26 billion in repairs for Qatar's LNG infrastructure

Key Takeaways

• North American LNG provided a war buffer
• Canada is leading the way in delivering LNG from the Pacific Coast

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).