EIA forecasts another wave of growth in US LNG imports

Jan. 22, 2007
Despite declining volumes in the last 2 years, US LNG imports should experience another wave of growth in the next 2 years, the US Energy Information Administration predicts.

Despite declining volumes in the last 2 years, US LNG imports should experience another wave of growth in the next 2 years, the US Energy Information Administration predicts.

“Predominantly driven by a significant expansion in world supply, EIA forecasts year-over-year increases in US LNG imports of 34.5% and 38.5% in 2007 and 2008, respectively,” analysts Damien Gaul and Kobi Platt said in a supplement to the federal energy forecasting and analysis service’s January 2007 Short-Term Energy Outlook.

They said US LNG imports are expected to reach 770 bcf in 2007, about 210 bcf more than in 2006, as exports from Nigeria and Trinidad and Tobago grow with the availability of more feedstock gas.

EIA also expects a bigger proportion of the two countries’ LNG exports to come to the US as world prices adjust to less demand growth in Asia and Western Europe, Gaul and Platt said.

Supplies also are expected from Equatorial Guinea, which will become the world’s 14th LNG exporting nation later this year, they added. “As of late 2006, the Marathon Oil Corp.-led project on Bioko Island was 85% complete. BG Group has contracted to market supplies from the one-train facility and has focused on the US as a destination market,” they said.

EIA expects US LNG imports to reach 1,080 bcf in 2008 with the likely arrival of supplies from Snohvit project in Norway through a contract with Statoil ASA, which has already contracted for capacity at Dominion Inc.’s Cove Point, Md., import terminal, Gaul and Platt indicated. Additional LNG imports from projects in Qatar and Yemen also could contribute to growth next year, they said.

While LNG from the Sakhalin-2 project in Russia, which is scheduled to start up in 2008, does not appear likely to reach the US directly, it could arrive in a regasified form from the Costa Azul terminal in Baja California which might receive some of the Russian supplies, Gaul and Platt said.

They cautioned that political activities in some LNG exporting nations, potential construction and start up problems, and competition from other consuming countries could influence actual US LNG import levels in the next 2 years.

Competition’s impact

Competition for supplies clearly affected US LNG imports in 2006, according to Gaul and Platt. Volumes were 580 bcf this past year, about 8% less than 2005’s 631 bcf and 11% less than 2004’s 652 bcf, they said.

US LNG import volumes accounted for an estimated 22% of total Atlantic Basin consumption in 2006, with the remainder going to Europe, the EIA analysts said. Through October 2006, the most recent period for which complete data are available, they said European LNG imports grew an estimated 12.6% year-to-year.

For all of 2006, Europe’s LNG imports are expected to be more than 2 tcf, with France, Belgium, and Spain accounting for most of the volume consumed, Gaul and Platt said. Spain leads Europe in imports because it relies heavily on LNG deliveries for its gas supplies and has outbid US buyers in order to meet core demand, including growing electricity generation needs, they said.

But the biggest change in Atlantic Basin LNG imports during 2006 came in the UK, where the Isle of Grain terminal, in its first full year of operations since reopening, received volumes of more than 115 bcf, Gaul and Platt said.

US capacity utilizations also were lower than expected in 2006 as supply problems in Nigeria and in Trinidad and Tobago affected liquefaction operations, the analysts said. US imports also felt the impact of fewer long-term supply contracts relative to other consuming countries, they pointed out.

“For the most part, the current LNG market functions through long-term contractual agreements for delivery of cargoes from producer nations to Western Europe and Asia. With the exception of deliveries from Nigeria and [from] Trinidad and Tobago, US importers have not yet begun to bring the large volumes of LNG under similar long-term agreements,” they explained.

Long-term prospects

In the reference case for its 2007 Annual Energy Outlook (AEO2007), EIA said it expects LNG imports to meet much of the increased US gas demand through 2030. In the AEO2007 reference case, which was released on Dec. 5, EIA expects US LNG imports to rise to 4.5 tcf in 2030 from 600 bcf in 2005, 200 bcf more than in its 2006 reference case.

“In addition to new terminals, including four that are currently under construction, expansions of three of the four existing onshore US LNG terminals (Cove Point; Elba Island, Ga., and Lake Charles, La.) are included in the AEO2007 reference case. Because of liquefaction project delays, supply constraints at a number of liquefaction facilities, and rapid growth in global LNG demand, the US LNG market is expected to be tight until 2012,” it said.