Editor’s note: This excerpt is from Stratas Advisors’ Global LNG service. Subscribers have access to the full report, which has sections about Europe, Latin America, Africa, Asia, the Middle East, Russia & CIS in addition to North America.
Stratas Advisors sees North America as the main pivot point behind the future of the LNG industry through 2030.
A furious buildout in liquefaction in recent years, led by the U.S. and Australia, is expected to last through to the 2023-2024 period, but beyond that demand growth markedly outpaces current liquefaction project development. The lack of projects in the early stages of development outside of North America is likely to lead to a squeeze in the LNG market around the middle of the next decade, given the longer lead times around developing liquefaction terminals.
In the last rush toward liquefaction before the crash in oil prices, U.S. projects were held up by the regulatory backlog that prevented most from moving forward in a timely manner. Five years later that backlog has been cleared, and most promising projects are fully permitted. In addition, a number of the promising projects are existing import proposals that are being turned into liquefaction projects.
The existing storage and jetty facilities serve to not only shorten the lead times for these projects, but reduce the costs significantly as well. And for the projects that are not brownfield in nature, most exist on or near fully developed supporting infrastructure on the U.S. Gulf Coast. With a fully constructed pipeline network, developed infrastructure and available workforce, even the greenfield projects are likely to be less of an issue than they would be in most other parts of the world.
North American imports have understandably waned to a minimum following the advent of shale across the continent. Remaining imports are largely restricted to one of two groups: existing import contracts that remain at a very favorable price point; or peak demand periods in specific regions such as the American Northeast, where pipeline capacity can be strained during the winter months requiring occasional supplemental cargoes. The latter also applies to Canada, where cargoes are sometimes received on the east coast.
Obviously, most of the import capacity sits idle across the continent or has been otherwise mothballed. Other portions of this capacity have now been converted to liquefaction facilities, including Sabine Pass, Freeport and Cameron LNG.
With the long-term contract model fading, LNG’s success as a commodity will rely on providers’ ability to put the product on the water as cheaply as possible.
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