The shale gas boom in North America has triggered a huge build-up of LNG infrastructure, with companies investing US$ 120 billion “in a bid to capture a slice of the lucrative global market”, according to Lux Research.
The shale gas revolution resulted in very cheap gas for US companies and consumers, however the export infrastructure under construction today could mean rising domestic cost as the global market balances.
Global LNG trade
The global LNG trade has increased seven-fold since 2002 to US$ 170 billion in 2012, and LNG infrastructure is the main bottleneck preventing US producers from accessing it. However, as North American capacity increases, Australia is set to become another export rival. Australia is strategically located to supply gas to energy-hungry markets such as Japan, South Korea, and has US$ 180 billion in current investments to add 3 trillion ft3 per year of natural gas liquefaction capacity each year until 2017.
"If all the approved and proposed projects began operating at full capacity today, the US could export nearly 30% of the gas it produces by 2020, creating a much more robust international market," explained Daniel Choi, Lux Research Analyst and one of the lead authors of the report titled, ‘Navigating the Treacherous yet Lucrative LNG Sector’.
"This would eliminate extremely low North American gas prices, hurting some domestic users, but would benefit the international economy overall," Choi added.
Lux Research analysts evaluated the impact of the shale gas boom on the growing global trade in LNG, and the infrastructure build-up across the world. Report findings include:
- Global shale gas development threatens North America. Although North America enjoys huge reserves of shale gas and a head start in its development, many other countries are rapidly making progress. China has technically recoverable shale gas reserves of 32 billion barrels of oil equivalent (boe), and Argentina has 161 boe.
- LNG vs. diesel debate. LNG is targeted to replace diesel for a range of applications, including as a transportation fuel and for off-grid power generation. In many countries, LNG prices are up to 25% lower than diesel prices, however LNG has additional storage and distribution costs.
- Novel business models are emerging. Companies such as REV LNG address high infrastructure costs for LNG by covering capex costs themselves and then charging customers between US$ 2.50 and US$ 2.80 per gallon of LNG, comparable to the price of diesel on an energy basis.
The report is part of the Lux Research ‘Exploration and Production Intelligence’ and the ‘Alternative Fuels Intelligence’ services.
Adapted from press release by Katie Woodward
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/15052014/shale_gas_and_lng_investment_596/