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2015-10-15 19:40:00

TOO MUCH LNG

TOO MUCH LNG

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.

Consulting firm IHS 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, said Trevor Sikorski, an analyst at Energy Aspects in London. Seven new plants in Australia will flood the market over the next two years. Cheniere Energy is planning the startup of its Sabine Pass terminal in Louisiana this quarter.

"The global LNG industry now resembles a game of 'musical chairs' with far more projects than the market can absorb," said 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's floating terminal in the Gulf of Mexico has been postponed. Inpex 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," said Tim Boersma, acting director of the Energy Security and Climate Initiative at the Brookings Institution in Washington.

North America

More than half of the 38 terminals proposed for the contiguous US may never be built, according to Fitch Ratings and the Brookings Institution, a nonprofit research group. Besides Cheniere's Sabine Pass, projects in development include Freeport LNG's terminal in Texas, Dominion's Cove Point in Maryland and the joint Lake Charles LNG venture in Louisiana between Energy Transfer and BG Group.

Twenty more terminals are planned for Canada, according to Energy Aspects, including the Kitimat project proposed by Chevron Corp. and Woodside Petroleum Ltd. in British Columbia. The higher costs associated with projects there, in part because of environmental opposition, makes it even less likely that they'll be built, Jeffrey Currie, head of commodities research at Goldman Sachs & Co. in New York, said in a Sept. 24 interview.

This deluge of North American gas exports was once seen as displacing some foreign supplies linked to the price of oil. Then the oil market crashed and crude lost half its value, and now that gas from abroad is looking cheap.

The pace of project postponements will pick up as the supply glut expands, Noel Tomnay, head of global gas and LNG research at Wood Mackenzie in Edinburgh, said in a Sept. 3 report. Development of even half of the capacity may keep the Asian market oversupplied through 2025, he said.

Australia's Gas

While the US LNG projects already under construction will probably come to fruition, any supply not already contracted will be difficult to find a home for, particularly in Asia where Australian gas is easy to come by, Currie said.

Spot LNG prices for delivery to Northeast Asia have slid 56% over the past year, according to data compiled by World Gas Intelligence. Shipments to Japan will average $5.80 per million British thermal units in 2015, a 65% decline from 2013, according to Energy Aspects.

The world's demand for gas meanwhile expanded by only 0.4% in 2014, the smallest gain since 2009, because of shrinking imports to Japan, South Korea, India and China, Bank of America said in an Aug. 21 note to clients.

"Given the price environment and the supply that's going to come online in the next five years or so," said Dino Kritikos, an analyst at Fitch in Chicago, "many of these projects are at an inherent disadvantage."

gasprocessingnews.com

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More: 

EU GAS STRATEGY 

NOVATEK UP 53% 

COMPETITIVE GAZPROM 

GAZPROM GROWS STRONGER 

CHINA & RUSSIA PROGRESSION

 

 

 

 

 

Tags: LNG, GAS

Chronicle:

TOO MUCH LNG
2018, June, 18, 14:00:00

U.S. IS BETTER

IMF - Within the next few years, the U.S. economy is expected to enter its longest expansion in recorded history. The Tax Cuts and Jobs Act and the approved increase in spending are providing a significant boost to the economy. We forecast growth of close to 3 percent this year but falling from that level over the medium-term. In my discussions with Secretary Mnuchin he was clear that he regards our medium-term outlook as too pessimistic. Frankly, I hope he is right. That would be good for both the U.S. and the world economy.

TOO MUCH LNG
2018, June, 18, 13:55:00

U.S. ECONOMY UP

IMF - The near-term outlook for the U.S. economy is one of strong growth and job creation. Unemployment is already near levels not seen since the late 1960s and growth is set to accelerate, aided by a near-term fiscal stimulus, a welcome recovery of private investment, and supportive financial conditions. These positive outturns have supported, and been reinforced by, a favorable external environment with a broad-based pick up in global activity. Next year, the U.S. economy is expected to mark the longest expansion in its recorded history. The balance of evidence suggests that the U.S. economy is beyond full employment.

TOO MUCH LNG
2018, June, 18, 13:50:00

U.S. INDUSTRIAL PRODUCTION DOWN 0.1%

U.S. FRB - Industrial production edged down 0.1 percent in May after rising 0.9 percent in April. Manufacturing production fell 0.7 percent in May, largely because truck assemblies were disrupted by a major fire at a parts supplier. Excluding motor vehicles and parts, factory output moved down 0.2 percent. The index for mining rose 1.8 percent, its fourth consecutive month of growth; the output of utilities moved up 1.1 percent. At 107.3 percent of its 2012 average, total industrial production was 3.5 percent higher in May than it was a year earlier. Capacity utilization for the industrial sector decreased 0.2 percentage point in May to 77.9 percent, a rate that is 1.9 percentage points below its long-run (1972–2017) average.

TOO MUCH LNG
2018, June, 18, 13:45:00

SOUTH AFRICA: NO BENEFITS

IMF - South Africa’s potential is significant, yet growth over the past five years has not benefitted from the global recovery. The economy is globally positioned, sophisticated, and diversified, and several sectors—agribusiness, mining, manufacturing, and services—have capacity for expansion. Combined with strong institutions and a young workforce, opportunities are vast. However, several constraints have held growth back. Policy uncertainty and a regulatory environment not conducive to private investment have resulted in GDP growth rates that have not kept up with those of population growth, reducing income per capita, and hurting disproportionately the poor.

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