More shipments of LNG will come to the US this year, whether the market needs them or not.
As much as 90 million tonnes/year of new LNG supply will flow towards global markets this year and next. With current LNG markets in a balance never before seen in world trade, the additional volumes must move somewhere. That somewhere is the market of last resort: the US. That market is already adequately supplied, thanks to the recent surge in shale gas production.
These were some of the major trends announced last month at Platts’ 8th Annual LNG conference in Houston.
US surge
For some time now, industry analysts have predicted that excess cargoes of LNG will find a home in the US, a default location in an increasingly balanced global trade. As prices fall in Asia and Europe, the argument goes, the plethora of storage and the thoroughly liquid market in North America will attract shipments unable to fix destinations in the other two markets.
Waterborne Energy’s Steve Johnson told the conference an average about 3 bcfd would arrive this year. Last year saw a sharp decline from the record volumes that arrived in 2007. While predicting growth in LNG shipments in the US for this year and next, Johnson did not explain why this would happen, given that natural gas demand, especially industrial and commercial, has dropped off the table. US markets are adequately supplied by domestic production and Canadian imports, complemented by what little LNG is coming here to satisfy existing long-term contracts.
Industry truths, supply delays
David Wells, vice-president for global LNG supply at Shell Gas & Power International BV, said there are three “truths” in the current market.
The first is that long-term demand is rising; the second, that security of supply is threatened by the passing of the “easy plays,” resource nationalism, and the rise of unconventional resource developments such as shales in North America and coalbed methane in Australia; and the third, that global environmental concerns have put hydrocarbon developments under pressure.
By 2050, said Wells, energy use must be “twice as efficient” as in 2008. To get there, carbon dioxide regulation “must be efficient and global.”
Wood Mackenzie’s Gavin Law, head of the firm’s gas and power consulting, noted the imminent arrival of new LNG supplies on the global market but cautioned that delays to those projects may still retard the wave. He also said the global economic crisis was just now hitting major supplier countries.
In general, Law sees a slow ramp up to full production for new LNG supply and said that LNG demand is being curtailed, especially in the US, by development of unconventional natural gas sources.
