Managing the global LNG market

April 29 2013 - Drew Robb

 

 

A seismic shift is ongoing in the worldwide Liquefied Natural Gas (LNG) marketplace spurred by the boom in unconventional sources of gas, particularly U.S shale gas. The volume of LNG produced annually is set to double by 2020 from its current level of 280 million tones per annum (tpa), according to the International Energy Agency (IEA). “Seven of the top ten investment projects in infrastructure in the world are LNG oriented,” said Laszlo Varra, Head of the Gas, Coal and Power Division at IEA.

This translates into a vast growing global market for turbomachinery. Companies, such as Cameron, Siemens, GE Oil & Gas, Mitsubishi and Dresser-Rand, are already scrambling to satisfy the demand. Global LNG consumption is expected rise from 303 million tpa in 2015 to 511 million tpa in 2030, according to IEA. That represents 14 million tpa average growth per year, which would require three massive 4.5 million tpa trains to be brought online every year.

Asia Pacific imports will jump from 192 million tpa to 310 million in that time span. The region now  receives its imports from LNG producers in Qatar, Australia, Indonesia, Malaysia and Nigeria. Europea imports will also rise from 87 million tpa to 152 million in 2030.

U.S. demand will remain flat as the nation’s gas reserves skyrocket. U.S. gas reserves have increased by 86% in the last three years to reach 2,543 trillion cubic feet, according to Keith Teague, President, Cheniere LNG, part of the Cheniere Pipeline Co. More and more proven shale gas reserves are being added each year (Figure 1). This translates into 100 years or more of gas supply, primarily coming from shale gas plays situated across the continent. The rapid increase in U.S. supply will trigger a major price drop by 2020, according to IEA. “The U.S. is being transformed into a future LNG exporter,” said Varra. As the U.S. enters the supply chain, it will be able to undercut other market prices.

By 2020, the price of U.S. gas will average about 11% to 15% of the price of oil, making it extremely attractive to condense that gas to LNG and export it to lucrative markets in Europe and Asia. Cheniere’s Teague laid out the math: With U.S. gas priced around $3 per million btu, it would cost another $3 for the liquefaction and $3 to ship it to Asia for a delivered cost of $9.45. That compares well with prices in Asia, which can rise as high as $15 per million btu. For Europe, the delivered cost would only be $7.70 compared to current rates of around $12.

 

The rest of this article appeared in the March April issue of Turbomachinery International.