The LNG industry is expected to see a series of new projects, driven by a growing appetite for natural gas. The new edition of Douglas-Westwood’s ‘World LNG Market Forecast 2015 - 2019’ forecasts global capital expenditure (Capex) to total nearly US$259 billion from 2015 to 2019. This includes spending on base-load onshore and offshore liquefaction, LNG carriers and LNG regasification via both onshore and offshore fixed terminals. Australasia and North America will be the main centres of liquefaction development while Asia will lead installed capacity of import terminals. North America is projected to become a net exporter, transforming from the second largest import region over the past five years, to zero over the forecast period.
Key exporting regions of Africa, Australasia and the Middle East will account for 60% of total forecast liquefaction capacity. A combined 479 million tpy is expected to be introduced globally over the forecast period.
The global LNG sector has been dominated by Australasia and Asia over the last five years, with Australasia accounting for the largest Capex share of over 45%. Meanwhile, Asia represented around 30%.
Australasia’s Capex share is expected to decrease to 19% over the forecast with US$50 billion attributed to liquefaction facilities. Projects planned to come onstream include the Greater Gorgon LNG, Queensland Curtis LNG (QCLNG), Ichthys LNG, Wheatstone LNG and the Australia Pacific LNG (APLNG) train 2.
Asia’s Capex is expected to grow slightly to 32% of investments over the forecast period. This will largely be made up by regasification/import projects in China, Indonesia and Japan, as a result of increasing appetite for energy. While the majority of forecast expenditure comes from regasification/import projects, most of the growth is from liquefaction/export projects – over 3.5 times the total of the previous five years.
With its plans to export LNG, North America is expected to gain significant market share over the forecast period with an expected expenditure of around US$70 billion, driven by the construction of liquefaction projects.
Global LNG capital expenditure on facilities 2010 - 2019 (source: Douglas-Westwood, 'World LNG Market Forecast 2015 - 2019').
LNG liquefaction terminals
From 2015 to 2019, Douglas-Westwood is expecting 178 million tpy of liquefaction capacity to come onstream through 15 expansion projects and 19 new developments. Associated costs for these terminals are expected to total US$170 billion. Capex for the forecast period represents over 90% increase from the previous five years. This is largely driven by a series of new projects in North America and Australasia and totals 71% of liquefaction capacity additions in the forecast period.
Traditionally having been a net importer of LNG, North America is actively developing its shale gas reserves and is now looking to effectively export production. All of North America’s total forecast spend of just over US$70 billion is attributed to liquefaction/export projects. The North American region has huge potential to become an effective LNG exporter and to have an impact on the global gas market. The realisation of this, however, is heavily dependent on the efficiency and the willingness of the US Federal Energy Regulation Commission (FERC) FERC and US Department of Energy (DOE) to grant approvals for these new facilities.
Australaia has been actively pursuing LNG export projects to exploit its large gas reserves. The region is expected to continue doing so and spend US$50 billion on LNG liquefaction/export facilities over the forecast period. However, there have been significant cost escalations that could threaten the viability of some of projects. The success of the current projects and the development of future ones are dependent on how the region manages its escalating costs.
Africa, Asia, Eastern Europe & FSU and the Middle East are expected to contribute 29% to global Capex on LNG liquefaction/export terminals. No LNG liquefaction/export capex from Latin America and Western Europe is expected over the forecast period.
LNG import terminals
Investments on import facilities are expected to total nearly US$66 billion, a compound annual growth rate of 7%. The forecast Capex is expected to increase 112% compared to the last five years.
From 2010 to 2014, Asia had the largest import capacity coming onstream at a total of 67 million tpy and Asia is expected to continue leading the region over the next five years. Almost US$47 billion is expected to be spent in the installation of 163 million tpy of LNG import capacity. Most of these projects will be in China, Japan and India.
North America was historically the second largest region in terms of import capacity coming onstream with 47 million tpy at a Capex of US$3.8 billion. But no additions are expected over the next five years.
Western Europe accounted for 22% of global installed import capacity over the past five years. Over 2015 - 2019, 74 million tpy is expected to be installed at a cost of US$12 billion. The majority of these projects will be in Spain, Italy, France, Finland and Belgium.
Africa and Australasia are not expected to have any import facilities installed over the forecast period.
Over the past five years, 82 LNG carriers were delivered, accounting for US$17.4 billion in Capex. All LNG shipbuilding activity during this period took place in Asia where the major yards are located. This is in contrast to the previous decade where there were LNG carriers still constructed in Western Europe. The transition is a result of improved know-how, skill-sets, processes and most significantly the lower costs offered by Asian shipyards.
The LNG carrier market is expected to display heavy spend throughout the forecast period, increasing by almost one third. General confidence in the LNG market and a robust line-up of LNG terminals point towards a strong LNG shipbuilding market. With the anticipated demand, yard capacity at the major shipbuilders such as Daewoo, Samsung and Mitsubishi may be constrained. In view of this, we can expect increasing participation of Chinese shipyards in the LNG shipbuilding sector, should demand for LNG carriers continue its increase.
Total global Capex over the next five years on LNG carriers, onshore liquefaction and regasification terminals is expected to increase 88% from the previous five years. While the expenditure profile is reflective of a growing industry, it is also the result of rising project costs, with Australia a prime example. If the challenge of rising costs can be managed, with a widespread adoption of cleaner energy, Douglas-Westwood expects to see booming LNG industry activity.
Written by Amanda Tay, Douglas-Westwood.
Edited by Callum O'Reilly
Douglas-Westwood’s ‘World LNG Market Forecast 2015 – 2019’ covers capital expenditure on base-load onshore and offshore fixed LNG liquefaction, LNG carriers and LNG regasification via onshore and offshore fixed import terminals. The report details LNG sector capital spend trends by region and facility type, supported by analysis and insight for strategy teams within shipping companies, contractors, shipbuilders, oil and gas operators, gas utilities and financial institutions. For more information, click here.
Note: there will be some differences between operator announcements and the Douglas-Westwood forecast start-up years as Douglas-Westwood believes that many of the proposed terminals are still in their early stages and have not attained necessary approvals or secured sites. Therefore, where appropriate, onstream years have been adjusted to incorporate these factors, arguably portraying a more realistic view of likely Capex. It is worth noting that Capex forecast has been phased over the project’s construction periods and therefore includes elements of expenditure on terminals which are expected to come onstream between 2020 - 2022.
Read the article online at: https://www.lngindustry.com/liquefaction/23122014/dw-world-lng-market-forecast-2015-2019-2000/