Global LNG Production Could Increase 53% by 2010 with More Than $50 Billion in Capital Investment

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Researched by Industrial Info Resources (Sugar Land, Texas). The growth in demand for LNG has risen from 100 million tons per annum (mmtpa) globally in 2000, to approximately 145 mmtpa in 2005. The demand curve for LNG is expected to be sharply more positive in the future and should reach 275 mmtpa in 2010 and 360 mmtpa by 2015. Over the 2007 to 2015 time frame, the countries of Japan, South Korea, India, China, Italy, Spain, the United Kingdom, and the United States will be the driving forces behind the increase in demand for LNG. The countries of France, Taiwan, Belgium, and Poland, among others, will drive demand, as well, but to a lesser degree. The majority of these countries are resource poor when natural gas is considered, with the exception of the United States, where the resources are present, but energy consumption has outstripped the ability to reliably produce it in the long run.

To supply this increasing global demand for LNG, approximately 33 new LNG production trains were scheduled to begin construction beginning in January of 2006. In order to bring these investments into production an investment of $50.8 billion spread out over the next five years will be required. The countries of Qatar, Nigeria, Russia and Australia will lead the way in terms of absolute dollars to be invested. Qatar will be the clear winner, investment wise, with over $10 billion in planned investment for LNG production. These four countries account for thirteen of the 33 planned LNG production schemes to be located in eighteen countries around the world. These projects range in size from $48 million to $4 billion and have an average capital value of approximately $1.5 billion.

Click on the image at right to view a chart showing the breakdown of LNG production projects globally.

The price for equipment, construction and engineering services has increased across the board due to the growth in the absolute numbers of both LNG liquefaction and regasification schemes being proposed globally. As a result of this sector price inflation, several supply side projects have experienced production startup delays and this has resulted in existing supply side issues that have affected the timing of several proposed LNG regasification projects.

During 2006, 11 mmtpa of LNG production capacity came online. During that year, ELNG2 (Idku) with a capacity of 3.6 mmtpa, Darwin (Bayu Undan) with a capacity of 3.2 mmtpa, and RasGas II T2 with a capacity of 4.7 mmtpa came online.

During 2007, two projects totaling 8.2 mmtpa are expected to begin production. These two projects are the Snohvit project with a capacity of 4.2 mmtpa and the Nigeria LNG T6 project with a capacity of 4 mmtpa of LNG production. Looking further out than 2007, the supply of LNG will increase almost exponentially.

In 2008, an additional 45.1 mmtpa of LNG production supply is scheduled to come online. These projects include the Damietta (Segas) T2, Equatorial Guinea (Alba), Sakhalin 2 T1/2, Tangguh – Indonesia, QatarGas II and the Austrailian NWS 5.

In 2009, an additional 53.3 mmtpa of LNG production is expected to come online in the countries of Australia, Peru, Yemen, Trinidad, Venezuela, and Nigeria. Nigeria will see the lion’s share of production increase with two dual 10 mmtpa LNG production projects.

Between the years of 2007 and the end of 2009, global production of LNG is forecast to grow by approximately 115.4 mmtpa. If this figure is added to the 21.6 mmtpa of production supply that came online in 2005then the total growth in LNG production in for the five-year time period from 2005 to 2009 could total approximately 137.7 mmtpa.

Cost increases are not the only bottleneck that needs to be addressed to allow the increasing LNG production volumes to make it to the demand markets of Europe, the United States, Asian subcontinent, and the Pacific Rim. The transportation of LNG itself is seen as an increasing problem of its own. The LNG carrier fleet is, and will have to continue undergoing a rapid expansion to meet transportation needs that will continue to increase with the demand for LNG.

By mid-2006, approximately 213 LNG carriers were in service globally. Of these 213 LNG carriers, nineteen were newly christened ships that joined the global fleet during the year. The new shipping represents a 10% growth in the overall number of ships capable of transporting LNG from areas of stranded natural gas supplies to the consumption markets. At the present time, approximately 148 new LNG carriers are on order with shipyards around the world representing a boom to the LNG carrier construction industry, LNG shipping companies, as well as to the companies supplying equipment and services to LNG transportation companies.

If all 148 LNG carriers on order are constructed, then the LNG carrier fleet will have increased by a total of 69%. Approximately 36 new LNG carriers are expected to be delivered during 2007 and an additional 45 ships are slated to begin service during 2008. Eighty-one new LNG carriers are slated to enter the LNG transportation sector during the span from 2007 to 2008. The sharp increase in the total number of new LNG carriers during these years alone is indicative of the growth that the global LNG market is presently experiencing, as well as the direction of the market sector as whole over the next decade.

Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 24 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.