Five years ago, energy companies hungry for the next big thing started planning as many as 90 terminals to send natural gas around the globe. Now, it seems the world only needs five more, Bloomberg reports.
Consulting firm IHS Inc. says only one in every 20 projects planned are actually necessary by 2025 as weakening Asia economies, cheap coal, the return of nuclear power in Japan and the ever-expanding glut of shale supply in North America temper demand for the power-plant fuel, putting tens of billions of dollars worth of export projects at risk.
Barring an unusually cold winter in Asia, global LNG supply will outstrip demand by next year, says Trevor Sikorski, an analyst at Energy Aspects Ltd. in London. Seven new plants in Australia will flood the market over the next two years. Cheniere Energy, meanwhile, is planning the startup of its Sabine Pass terminal in Cameron Parish this quarter.
“The global LNG industry now resembles a game of ‘musical chairs’ with far more projects than the market can absorb,” says James Taverner, an IHS analyst in Tokyo. “There is a very narrow window of opportunity for new projects that want to take final investment decision by 2020.”
Four years ago, the International Energy Agency predicted global demand for the heating and power plant fuel would climb 16% by 2016. Now, it’s projecting 11%, and terminal developers are taking note. Excelerate Energy LP’s floating terminal in the Gulf of Mexico has been postponed. Inpex Corp. delayed the start of an LNG project in Australia by almost a year to the third quarter of 2017.
“It will be increasingly difficult to convince financial institutions to put major sums of money on the table to construct additional capacity,” says Tim Boersma, acting director of the Energy Security and Climate Initiative at the Brookings Institution in Washington.
More than half of the 38 terminals proposed for the contiguous U.S. may never be built, according to Fitch Ratings Inc. and the Brookings Institution, a nonprofit research group. Aside from Cheniere’s Sabine Pass project, others in development include Freeport LNG Development LP’s terminal in Texas; Dominion Inc.’s Cove Point in Maryland and the joint Lake Charles LNG venture in Louisiana between Energy Transfer Equity and BG Group. Also, on Monday, a Louisiana-based firm for which former Gov. Buddy Roemer is chairman says it expects to break ground on a new $11 billion liquefied natural gas export facility on the Calcasieu River Ship Channel in Cameron Parish in mid-2017.
