Industrial Market Outlook: More LNG Project Spending On Horizon

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Researched by Industrial Info Resources (Sugar Land, Texas)--With its energy security, price transparency and infrastructure advantages, the U.S. is well poised to take advantage of the next phase of global demand for liquefied natural gas (LNG), according to presenters at Industrial Info's recent 2017 Industrial Market Outlook in Houston, Texas.

Shane Mullins, Industrial Info's vice president of product development for energy markets, said the next phase of demand will begin sometime in the early to mid-2020s, when the global supply and demand balance improves to the point where the commissioning of new LNG trains could be justified.

On the minus side, demand in Japan and South Korea is projected to decline, as South Korea is developing more coal-fired power capacity, while Japan is focusing on the restart of its nuclear power plant fleet, albeit more slowly than expected, in the wake of the 2011 Fukushima Daiichi nuclear disaster, which prompted that country to take its nuclear facilities offline.

On the plus side, there will be new LNG markets, including Colombia, El Salvador, Jamaica, Panama and Puerto Rico, opening up as more countries add LNG import terminals over the next several years. "We are tracking these LNG regasification projects globally so we can get a handle on what the demand outlook picture could be," Mullins said. Taking several factors into account, Mullins said it will be at least 2022 before any new major LNG capacity is needed beyond what is currently under construction.

Even so, on a global scale, "We still feel that by the 2018 time frame we will see at least two new liquefaction facilities, large-scale, required to start construction each year for the next several years to meet this next second wave of LNG demand coming our way," Mullins continued. "It is a long way off, but we cannot build a large-scale LNG train in one year. The average is five years between financial investment decision and completion.... So you really have to get yourself to a point where you get to construction in 2018 to be online and delivering your product in 2022 or afterwards."

North America is in a better position to take advantage of these trends than other parts of the world that don't have as much supporting infrastructure, energy security and price transparency, Mullins said.

For 2017, one of the LNG projects that is expected to start construction is the first phase of Southern LNG's (Birmingham, Alabama) $4 billion grassroot Elba Island LNG production and export facility in Georgia. The 2.5 million-ton-per-year first phase of the project is expected to be placed in service in mid-2018, producing up to 2.5 million, and is supported by a 20-year purchase agreement with Royal Dutch Shell (NYSE:RDS.A) (The Hague, Netherlands). In Canada, Woodfibre LNG has been granted financial approval to construct an LNG production and export facility in Squamish, British Columbia. The first phase is valued at approximately $1 billion and will produce 2.1 million metric tons per year of LNG for export.

Mullins cautioned that many other planned LNG projects are struggling to secure binding commitments for buyers willing to commit to a 20-year project in 2017.

One project that is less likely to move forward this year is the grassroot Prince Rupert LNG liquefaction plant in British Columbia. The project by Royal Dutch Shell would include two trains, each producing 7 million metric tons per year of LNG for shipment to Asian markets. However, Shell recently sought new bids for a main contractor for the project, Mullins noted.

Other projects that are positioned to move forward in the next two years include Texas LNG Limited's (Houston, Texas) 2 million-ton-per-year LNG facilities in Brownsville, Texas, and Magnolia LNG's 4 million-metric-ton-per-year project in Lake Charles, Louisiana, as well as Energy Transfer Partners LP's (NYSE:ETP) (Dallas, Texas) planned 5.5 million-ton-per-year liquefaction plant, also in Lake Charles.

Moving forward, the trend will be toward smaller (and less expensive) modular-design LNG plants that can help meet the burgeoning needs of overseas markets such as those in South America, Mullins said.

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/.