LONDON—Prospects for nearly half of the world’s projects to build infrastructure for exporting LNG have faltered in recent months, amid rising concerns about climate change, public protests and delays due to the coronavirus pandemic, according to a report published July 7.
Out of 45 major LNG export projects in pre-construction development globally, at least 20—representing a capital outlay of some $292 billion—are now facing delays to their financing, researchers at Global Energy Monitor found.
That marks a stark shift by investors away from what many had considered a promising fuel market, already buffeted by slower growth in demand, rising competition from renewable energy technologies and opposition over the industry’s climate-warming emissions.
The vice president of the European Investment Bank said the report underlined the unacceptable risk of investing in LNG assets.
“Investing in new fossil fuel infrastructure like liquefied natural gas (LNG) terminals is increasingly an economically unsound decision,” Andrew McDowell told Reuters in an email.
The bank had announced in November that it would stop financing fossil fuel projects at the end of 2021.
The LNG industry has made big bets on a more positive outlook, as many analysts have predicted that demand would outstrip supply sometime in the next decade.
Companies committed $160 billion to $170 billion to new LNG export terminal construction around the world in 2019, almost triple the roughly $65 billion committed in 2018, said researchers at the San Francisco-based non-profit research group.
In total, companies had announced plans to build $758 billion of projects that are as yet in the pre-construction phase. But with 20 projects now in jeopardy, including nine in the United States, that planned capital outlay could be reduced by $292 billion, or 38%, if the delays persist indefinitely, the researchers told Reuters.
“LNG infrastructure faces the risk of becoming stranded assets and should be avoided,” said Erik Fransson, head of the fund department at the Swedish Pensions Agency, which has $12 billion of assets under management.
Meanwhile, the pace of LNG terminal development has been pushed back by at least 18 months since the pandemic, the authors said.
“The sector is really shut down at the moment in terms of advancing further new projects,” report co-author Ted Nace, executive director of Global Energy Monitor, told Reuters.
LNG investment has had strong government support in many countries. And oil companies in the United States, Europe and elsewhere still plan to boost LNG exports over the next decade.
That has raised worries that resulting emissions of carbon dioxide and methane could make it harder to achieve the temperature goals in the 2015 Paris climate accord.
Though burning natural gas emits less planet-warming carbon dioxide than coal per unit of energy produced, climate scientists have warned that the industry’s rapid growth as well as leaks of methane—a potent greenhouse gas—threaten progress in limiting climate change.
As for future projects, 12 companies had said at the start of this year that they planned to make final investment decisions in 2020 to build new LNG export plants in North America, according to a Reuters survey. That total is now down to four, and analysts only expect one project to move forward this year.
Here’s a snapshot of recent energy deals including the acquisition of a “unique opportunity” in the Permian Basin by Lime Rock Resources in a $508.3 million deal plus Whiting Petroleum’s exit from the D-J Basin.
Here’s a quicklist of oil and gas assets on the market including a Rockcliff Energy package of long-lived conventional production in East Texas plus the sale of an undivided 50% in BHCH Mineral’s legacy mineral and royalty portfolio.
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