Released October 08, 2020 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Like other commodities, liquefied natural gas (LNG) took a plunge in both price and demand as a wave of shutdowns and decreased use followed in the wake of the COVID-19 pandemic. In the U.S. alone, more than 110 LNG cargos were cancelled between June and August. While short-term LNG demand has dimmed, long-term prospects are expected to pick back up. However, the amount of LNG capacity in planning greatly exceeds demand forecasts in the coming years. In Industrial Info's recent webinar, Shale Mullins, Vice President of Product Development, and Jesus Davis, Director of Oil & Gas Research for North America, discussed how the LNG market is set to take shape in the coming years.
In 2018, about 45% of global LNG projects scheduled for startup were delayed into 2019, which helped keep the market in balance for a time, but according to Mullins, those delays set up 2019 as the beginning of a period of oversupply. In 2019, about $56 billion in new commercial investment reached startup, mainly in the U.S., but it also represented the tail-end of a wave of LNG investments in Australia. This year's U.S. startups have included the final trains of Kinder Morgan's Elba Island facility in Georgia, Freeport LNG's plant in Texas, and the remaining trains of Sempra Energy's facility in Cameron, Louisiana. In total, 51.75 million tons per annum (MTPA) were added in the U.S. between 2018 and 2020, quickly escalating the U.S. into the world's No. 3 LNG exporter.
There is currently 331 million tons being developed in the U.S., most of which will not come online. North America has about 20 million MTPA under construction.
However, throughout the world, several developers have delayed the financial investment decisions for projects, including, in the U.S., Cheniere Energy Incorporated and Freeport LNG, as COVID-19-related lockdown measures in the oversupplied market continue to depress prices. Mullins said spot prices were likely to remain below 2019 levels until COVID-19-related consumer shutdowns ended. While the world saw about 355 million tons of LNG traded last year, that number was expected to fall 340 million tons this year. "We are expecting a sharp recovery in demand next year, but even with that recovery, there's a two-year delay in year-over-year demand growth at a time when new LNG supplies have recently entered the market," said Mullins, who said that while global supply and demand were previously expected to be relatively balanced by 2025, this had now been pushed out to 2027 or even 2028.
One of the things buoying demand is a large amount of gas-fired power capacity coming online. Although renewables are taking certain parts of the world by storm, Mullins said there is $613 billion in natural gas-fired power under development throughout the world, with more than 1,800 projects representing about 540 gigawatts (GW). While not all of the required gas will be supplied by LNG, Mullins said LNG use for these plants would outpace pipeline gas in the near term. China represents about 48 GW of gas-fired power under development. LNG imports to China are expected to grow 4% this year. India and Indonesia also represent growing LNG markets.
Along with growing markets comes regasification development. Mullins said there were approximately 185 regasification projects that could potentially import an additional 800 MTPA of LNG. There is approximately 167 MTPA of regasification capacity under development in Southeast Asia, and new terminals are expected to be completed next year in Myanmar, Thailand and Vietnam. In the Middle East, countries such as Kuwait and Lebanon are developing regasification capacity. In Latin America, while demand is declining in Mexico and Argentina, most of the demand is coming from Brazil, where there are 10 import terminals in development.
While Europe's LNG demand is not expected to increase over last year, its market represents a 20% share of global imports. Mullins said, "Right now, there's over $10 billion in LNG terminal investments spent in 16 countries from Croatia to the U.K. that will keep that (demand) intact."
To meet projected LNG demand by 2030, about 132 MTPA of capacity would need to be approved by 2025. While the U.S. has a great deal of proposed development, only about 10% of this is expected to move forward, as the total proposed capacity would easily outstrip demand in this global market. As with the U.S., about 10% of the world's proposed projects are expected to move forward.
Mullins said, "The long-term demand fundamentals are still in place. Global demand for LNG is still expected to be 550 to 600 metric tons per annum by 2035, and to produce that, we're going to need to have 650-700 MTPA of nameplate capacity in place. Today though, there's 430 MTPA that's already operational ... Despite the challenges facing LNG developers this year, we do see [financial investment decision] approvals likely in the shorter term."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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.
In 2018, about 45% of global LNG projects scheduled for startup were delayed into 2019, which helped keep the market in balance for a time, but according to Mullins, those delays set up 2019 as the beginning of a period of oversupply. In 2019, about $56 billion in new commercial investment reached startup, mainly in the U.S., but it also represented the tail-end of a wave of LNG investments in Australia. This year's U.S. startups have included the final trains of Kinder Morgan's Elba Island facility in Georgia, Freeport LNG's plant in Texas, and the remaining trains of Sempra Energy's facility in Cameron, Louisiana. In total, 51.75 million tons per annum (MTPA) were added in the U.S. between 2018 and 2020, quickly escalating the U.S. into the world's No. 3 LNG exporter.
There is currently 331 million tons being developed in the U.S., most of which will not come online. North America has about 20 million MTPA under construction.
However, throughout the world, several developers have delayed the financial investment decisions for projects, including, in the U.S., Cheniere Energy Incorporated and Freeport LNG, as COVID-19-related lockdown measures in the oversupplied market continue to depress prices. Mullins said spot prices were likely to remain below 2019 levels until COVID-19-related consumer shutdowns ended. While the world saw about 355 million tons of LNG traded last year, that number was expected to fall 340 million tons this year. "We are expecting a sharp recovery in demand next year, but even with that recovery, there's a two-year delay in year-over-year demand growth at a time when new LNG supplies have recently entered the market," said Mullins, who said that while global supply and demand were previously expected to be relatively balanced by 2025, this had now been pushed out to 2027 or even 2028.
One of the things buoying demand is a large amount of gas-fired power capacity coming online. Although renewables are taking certain parts of the world by storm, Mullins said there is $613 billion in natural gas-fired power under development throughout the world, with more than 1,800 projects representing about 540 gigawatts (GW). While not all of the required gas will be supplied by LNG, Mullins said LNG use for these plants would outpace pipeline gas in the near term. China represents about 48 GW of gas-fired power under development. LNG imports to China are expected to grow 4% this year. India and Indonesia also represent growing LNG markets.
Along with growing markets comes regasification development. Mullins said there were approximately 185 regasification projects that could potentially import an additional 800 MTPA of LNG. There is approximately 167 MTPA of regasification capacity under development in Southeast Asia, and new terminals are expected to be completed next year in Myanmar, Thailand and Vietnam. In the Middle East, countries such as Kuwait and Lebanon are developing regasification capacity. In Latin America, while demand is declining in Mexico and Argentina, most of the demand is coming from Brazil, where there are 10 import terminals in development.
While Europe's LNG demand is not expected to increase over last year, its market represents a 20% share of global imports. Mullins said, "Right now, there's over $10 billion in LNG terminal investments spent in 16 countries from Croatia to the U.K. that will keep that (demand) intact."
To meet projected LNG demand by 2030, about 132 MTPA of capacity would need to be approved by 2025. While the U.S. has a great deal of proposed development, only about 10% of this is expected to move forward, as the total proposed capacity would easily outstrip demand in this global market. As with the U.S., about 10% of the world's proposed projects are expected to move forward.
Mullins said, "The long-term demand fundamentals are still in place. Global demand for LNG is still expected to be 550 to 600 metric tons per annum by 2035, and to produce that, we're going to need to have 650-700 MTPA of nameplate capacity in place. Today though, there's 430 MTPA that's already operational ... Despite the challenges facing LNG developers this year, we do see [financial investment decision] approvals likely in the shorter term."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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.
