LEAD STORY
By David Gardner, a partner at the specialist energy and shipping law firm Curtis Davis Garrard, and Joe McGladdery, an associate at Curtis David Garrard
The LNG industry is experiencing a period of dramatic growth. According to the US Energy Information Agency, the volume of LNG traded grew from 2996.31 billion cubic feet (bcf) in 1993 to 6453.64 bcf in 2004 .
In addition the pattern of LNG trading has altered. Traditionally there has been a “chain” of long-term contracts linking for each project the gas producing, transportation and liquefaction infrastructure in each exporting country, with the purpose-built LNG tankers dedicated to that project, and the storage and regasification import terminal in the receiving country.
Also in this issue
Recognition of digital technology as an important means of improving process functionality is growing throughout industry. In today’s supply constrained LNG market where plant availability goals are 24/7-365, each hour of unplanned down time means unrecoverable lost revenue, and the potential for delivery penalties.
Financing strategies and principles throughout the LNG value chain
Written byOne of the characteristics that sets the LNG industry apart from other large-scale infrastructure groups is the sheer scale of capital required.
To get gas from reservoir to burner tip via LNG would, in the present market, require at least $5 to $10 billion in dedicated infrastructure. For some mega-scale projects presently being planned or under construction, the upstream and liquefaction costs alone have reached $20 billion.
David Wood and Saeid Mokhatab
David Wood & Associates, Lincoln, UK
Michael J. Economides
University of Houston
While natural gas, with some 23.5% of all world energy demand in 2005, is still slightly behind coal as the world’s third largest source of primary energy (oil still dominates), it is poised to move up because of significantly emerging new trade.
The US natural gas market will be walking something of a tightrope during during 2007 and 2008.
We anticipate an increase in LNG imports over the course of the next two years – especially in 2008 – to end the decline we have witnessed over the last two years.
Any discussion of global supply trends must include the dynamics of the emerging LNG spot market. The spot market now accounts for 10 percent of LNG sales and while growing will remain the junior partner of the long-term market.
Of possibly greater significance is the development of diversion capability within long-term supply contracts. It enables suppliers and receivers to divert volumes at times of lower demand to a third party elsewhere.
