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LNG producers seeking new ways to market product

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LNG Industry,

Bloomberg are reporting that as LNG producers seek new ways to market their product, they are turning to an age-old technique: packaging.

As demand for electricity booms in developing nations, LNG producers are offering to supply both fuel and a power plant in partnership agreements that can lock in consumption of their product for years. For their customers, it means dealing with a single entity responsible for every link in the chain.

As many as five projects planned globally may be developed as integrated LNG-to-power. LNG producers Cheniere Energy Inc. and Total SA have package deals either in the works or discussed, while power plant constructor Siemens AG and vessel providers such Hoegh LNG Holdings Ltd. offer their input as partners.

Global LNG production is expected to generate a record surplus of 46 million t a year by 2019, or approximately 13% more than the market needs. Developing nations will boost demand for gas and power by more than 2% annually to 2040, while consumption in richer countries is close to stagnation.

Siemens AG have expressed interest in South Africa’s US$3.7 billion gas-to-power program, initially planned at two ports. The new system will help diversify the nation’s generation mix that is reliant on coal for more than 75% of its power generation.

Plunging gas costs also make the fuel even more attractive to developing nations. The average LNG price will probably drop to US$3.8 per million British thermal units next year. Spot LNG in northeast Asia dropped 14% to US$8.30 this week, while prices in southwest Europe rose 6.3% to US$8.50.

Such projects are often considered an interim option until nations develop their own gas resources. A combined solution may cost US$1 billion or more depending on the plant’s capacity. Gas has to remain affordable beyond 2020 for countries looking at LNG imports as a long-term solution.

The first exporter of LNG from the US in more than four decades will have exclusive rights to deliver the fuel for 15 years to an FSRU that will be provided by Hoegh LNG Holdings Ltd. LNG supplies are set to start in 2019 and will be delivered via a 40-mile pipeline to an initial 600 megawatt gas-fired power plant.

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