LNG

Floating liquefied natural gas (FLNG) terminals gain traction with global capacity set to reach 42 mtpa by 2030, climbing to 55 mtpa by 2035 – almost four times the 14.1 mtpa recorded last year, research from Rystad Energy finds.

Production companies seeking efficient and cost-effective methods of increasing their output are forecast to increase spending by almost 20 percent in 2023 to total $58 billion for additional oil and natural gas resources to satisfy global demand for energy such as LNG and pipeline gas and for necessary activities like petroleum refining and chemicals production to make products such as pharmaceuticals.

Saipem, the Italian energy engineering company working on oil, pipeline gas and LNG projects worldwide, said it was awarded new contracts worth $1 billion for crude and gas in Saudi Arabia and the development of underwater drones in Brazil as a new survey underpinned the long-term viability of oil in the energy mix to help finance cleaner alternatives and technologies.

Investments in new LNG infrastructure are set to surge, reaching $42 bill annually in 2024, according to a report from Rystad Energy. 

These greenfield investments are 200 times the amount in 2020 when just $2 bill was invested in LNG developments, due to the pandemic. 

However, project approvals after 2024 are forecast to drop considerably, as governments transition away from fossil fuels and accelerate investments in low-carbon energy infrastructure.

New LNG projects are driven mainly by the short-term increase in natural gas demand in Europe and Asia, due to Russia’s war in Ukraine and ensuing sanctions and restrictions placed on Russian gas exports. 

Spending on greenfield LNG projects this year and next will stay relatively flat, with $28 bill approved in 2021 and $27 bill in 2022. Investments sanctioned in 2023 will show a modest increase, nearing $32 bill, before peaking at $42 bill in 2024. 

After this date, investments will decline and drop back to near 2020 levels reaching $2.3 bill in 2029.

Despite an expected jump in 2030, when project announcements are forecast to total nearly $20 bill, investment in greenfield LNG is unlikely to return to 2024 levels, as countries scale up investments in low-carbon technologies.

Global gas demand is expected to surge 12.5% between now and 2030, from about 4 trill cu m to around 4.5 trill.

Gas demand in the Americas will remain relatively flat up to 2030. In contrast, on the back of strong economic growth and pro-gas policies from governments, regional demand in Asia/Pacific will soar, growing 30% from about 900 bill to around 1.16 trill cu m by 2030. 

The Americas – primarily the US – will account for 30% of cumulative gas demand by 2030, while Asia/Pacific will account for 25%, Rystad said.

Helped by this new infrastructure, total LNG supply is expected to almost double in the coming years, growing from around 380 mill tonnes per annum in 2021 to about 636 mill tonnes in 2030, with several major LNG projects already underway or in the pipeline. LNG production is predicted to peak at 705 mill tonnes per annum in 2034.

“Recent price surges in natural gas markets worldwide have somewhat constrained gas demand, triggering a resurgence of coal-fired power generation in many countries.

However, governments remain bullish on gas as an affordable, transition fuel for power in the coming years as demonstrated by the rapid growth in LNG infrastructure investments,” explained Palzor Shenga, Rystad Energy’s Vice President of Analysis.

Asian spot LNG prices have risen to near record levels last week, as Asian buyers sought to secure supply ahead of winter, narrowing the price spread with Europe where Russian gas flows remain curtailed.

Global LNG trade increased by 6 percent to 385 million tonnes with economic activity picking up in several countries while supply constraints and rising demand caused significant volatility in prices as nations scrambled to secure LNG cargoes to meet gas demand for the past winter season.

Trading in the LNG sector was one of the issues covered by the 2022 edition of the “Global Gas Report” published by the International Gas Union on the occasion of the 28th IGU World Gas Conference in South Korea.

“Overall, LNG exports grew in 2021, with the US leading the way through its year-on-year increase of 23 million tonnes,” said the IGU in a report covering the past two years.

“This provided security of supply to some extent, especially in a tight market. US LNG recovered well from the cancellation of cargoes and reduced usage of liquefaction plants the previous year,” said the IGU report.

About 48 percent of US export volumes were delivered to Asia, driven by increasing demand in South Korea and China.

The IGU noted that Japan was the third-largest importer of US LNG in 2021, with the three countries accounting for over 36 percent of all US export volumes last year.

Brazil surge

LNG exports to Europe had also increased in March and April 2021, a year before the Ukraine events and after a cold winter had depleted the region’s natural gas in storage.

“Volumes decreased during the following months but increased again in the fourth quarter and peaked in December 2021, as Europe’s natural gas inventories remained low,” the IGU recalled.

US LNG exports to Brazil increased from 2.3MT in 2020 to 7MT in 2021 as an intense drought in the country limited hydro-electric power generation and led to more consumption of natural gas for power.

“LNG exports from Australia, Qatar and Russia remained stable from 2020 to 2021, while there was a decrease in volumes from Nigeria and from Trinidad & Tobago over the same period,” said the IGU report.

Pipeline exports

Pipeline natural gas export volumes also increased last year by 6 percent, mirroring the rebound of global economic activity.

“The US saw an 8 percent rise in pipeline exports to Mexico, while domestic consumption in the country remained low,” the report noted.

In the Asia Pacific region, net gas imports grew by 17 percent, with one-fifth of that incremental volume attributed to increased pipeline imports.

“This was particularly prominent in China, as import volumes rose due to weather-related factors and higher economic activity,” said the IGU.

“Russia’s pipeline export volumes increased by about 4 percent from 2020, with incremental volumes flowing to Germany, Italy and Turkey,” it added.

Europe’s pipeline imports rose by 0.5 percent in 2021, supported by an annual increase in volumes flowing from Algeria.

Russia’s pipeline deliveries to Europe declined further towards the end of the year, resulting in a tighter market and higher gas prices.

The IGU said that natural gas production levels in the Middle East increased, with Iran’s pipeline exports to Turkey and Israel’s pipeline exports to Egypt growing significantly.

Energy majors, natural gas production companies, investment banks and commodities firms are all looking closely at potential losses or gains in 2022 from derivatives positions after the surge in benchmark gas prices linked to the LNG sector.

US liquefied natural gas producers have seen their costs of supply increase for shipments to Asia, though the plants on the Gulf Coast and the East Coast are unlikely to repeat the 2020 cost-related shut-ins as global LNG demand has rebounded.

First analyses have begun to emerge on the future impact of Turkey’s huge Tuna-1 Black Sea natural gas discovery announced last month, with estimates suggesting the country could save up to $20 billion in import costs for LNG and pipeline natural gas deliveries.

Oman is planning to increase its natural gas production for domestic use and LNG exports to such an extent that the sultanate in the Arabian peninsula will see gas output levels overtaking oil by around 2025.