Imports of LNG into North America are set to increase to 4.2 bcfd in 2014 from 1.7 bcfd in 2009, according to a report by consultants Wood Mackenzie Ltd.
The report forecasts North American LNG imports will rise despite increased domestic production of shale gas and the current recession that has reduced demand growth.
“In light of recent history, and the longer term outlook for growth in domestic US shale gas, many industry analysts and commentators have been suggesting that the outlook for LNG imports into North America is bleak,” said WoodMac North American LNG analyst Murray Douglas.
Although regasification capacity has been overbuilt, Douglas said, “The medium-term outlook for LNG in North America is not as dire as other commentators are suggesting, despite the success in developing shale gas.”
Favorable factors
In 2008, despite lower gas prices in North America than in Europe or Asia, baseload volumes of 1 bcfd flowed to the Everett, Elba Island, and Altamira LNG regas facilities. WoodMac forecast baseload imports into these terminals will continue into 2009 and beyond.
With a significant proportion of the 82 million tonnes/year of new liquefaction capacity coming on stream already dedicated to Asian markets, there is not a huge requirement for additional uncontracted volume in the Pacific Basin, especially given the economic downturn on demand levels.
“The result is a surplus of LNG that will flow to the more liquid Atlantic Basin markets, which have available regas capacity and the means to accept uncontracted volume,” WoodMac forecasts.
A ‘global sink’ for LNG
The report describes the US as the “global sink” for LNG as the largest and most liquid markets. “Some of this relatively low-cost new liquefaction capacity will compete with domestic shale gas,” Douglas said. “This will suppress price and in turn delay some higher cost domestic developments.”
WoodMac said the North American gas market will prove more attractive to LNG suppliers as the oil-linked gas prices in European markets soften and Asian buyers switch from gas to oil, resulting in more LNG on the market. With the softening of global gas demand, the LNG market could be oversupplied in the near term.
