IHS CERAWeek: US ‘revolutionizing’ growing global LNG market, speaker says

This story was corrected on Feb. 29 to specify that the Sabine Pass LNG cargo was the first LNG shipment of the 2000s from the US Lower 48, and not the country's first LNG export. Previous export cargoes have shipped from Alaska's Kenai LNG plant.

A decade after forecasts of increased construction of LNG import terminals in the US, the first LNG shipment of this century from the Lower 48 departed Sabine Pass, La., this week for Brazil. The event overlapped with a Feb. 24 gathering of leaders from the natural gas sphere at IHS CERAWeek in Houston.

“There is no doubt that LNG from the US is revolutionizing the market in terms of flexibility,” said Meg Gentle, president of marketing of Cheniere Energy Inc., during a panel discussion on global gas markets. Her firm liquefied, loaded, and shipped that first cargo on the Asia Vision LNG carrier.

The continued evolution of LNG in the US will result in the nation emerging as one of the three largest suppliers on the global market by 2020, accounting for 8 bcfd in total production from the five facilities currently under construction, Gentle said. “That will represent about 20% of the LNG market at that time.”

She explained that gas is abundant and cheap to produce in the US, and construction costs for liquefaction are among the world’s least expensive. “Therefore natural gas from the US can match the market price for gas in every single region of the world.”

Over the next 5 years, the global market will increase by 50%, she said, noting that 16 new liquefaction plants will be brought into production over the next 24 months alone.

“By 2030, we will need to add over 200 million tonnes of new liquefaction capacity that needs to begin construction by 2025,” stated Gentle. “If the trains are each about 5 million tonnes[/year] of capacity, we need 42 new trains to reach final investment decision in the next 5 years.”

Mentioning that the International Energy Agency projects world gas demand to double by 2040, Josh Frydenberg, Australia’s minister for resources, energy, and Northern Australia, said during a separate panel discussion of energy ministers that his country also has positioned itself to capitalize on that demand by building up its LNG sector.

“Over the next 5 years Australia will triple its LNG production,” reflecting “some $200 billion in investment” in the industry, he said, adding the country “will overtake Qatar by 2020 as the world’s largest exporter of LNG.”

Diversifying gas markets

Expected as a primary target of supply from the US and Australia is Asia, and particularly Japan, where a newly formed joint venture of Tokyo Electric Power Co. Inc. and Chubu Electric Power Co. Inc. hopes to become one of the world’s largest LNG buyers.

Yuji Kakimi, president of JERA, said increased supply from the US will provide more liquidity to the Asian market. “The increased liquidity will also result in more transparency in the pricing mechanism.” Demand is growing within Japan for wider use of price indices, he said.

“We have to see the development of gas indices in Asia,” Gentle added, “to provide the greater liquidity that goes with a flexible gas market.” She noted that there are hundreds of price points in the US in addition to Henry Hub, which happens to be the best-known.

Alexander Medvedev, deputy chairman of the management committee of OAO Gazprom, said that while the Asian market is currently slowing down because of China, other nations on the continent such as India and Pakistan can fulfill demand.

Gentle stated the Middle East “is expected to be a 20-30 million-tonne[/year] market in the next few years from nothing last year.”

In Europe, gas costs almost three times that of the US, noted Iain Conn, Centrica PLC chief executive officer. “Europe is going to benefit from gas-on-gas competition,” he said. “We’ve got Russian gas competing with Norwegian gas competing with LNG competing with indigenous gas.”

With the rise of Atlantic basin LNG, Conn sees Europe as the marginal price setter in the near term with demand not increasing as expected in Asia. “This interregional movement of gas is here to stay,” Conn said, “with interconnected gas pricing” like that of crude oil.

Yuval Steinitz, Israel’s minister of national infrastructure, energy, and water resources, said his country, where the giant Tamar and Leviathan offshore gas fields provide an abundance of local supply (OGJ Online, Feb. 25, 2016), is looking to export through pipelines to Egypt, Turkey, and Greece via Cyprus.

As an added benefit, abundant gas resources and mutual economic interests could promote stability in the Eastern Mediterranean region, Steinitz stated.

Contact Matt Zborowski at matthewz@ogjonline.com.

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