New Year, New Outlook for LNG

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by Karen Thomas

lng

January is traditionally a time to look forward.  And so LNG shipping turns its focus to the year ahead and to the developments and the trends that will shape our market.

LNG World Shipping’s next infographic will highlight how much new supply is due to hit the market between now and 2020.  Of a total 120.2 million tonnes a year (mta) of LNG-producing capacity confirmed to year-end 2020, this year’s share comprises a – relatively – modest 24.9 mta.

The Class of 2017 includes the world’s first floating LNG (FLNG) venture, Petronas-owned PFLNG Satu, which will produce up to 1.2 mta.  Other new volumes will come from Australia’s Inpex-led Ichthys, due to start production on its first, 4.2 mta train, and Wheatstone LNG whose first train will produce up to 4.5 mta, and from Indonesia’s small-scale Sengkang LNG project, due to produce an initial 500,000 tonnes.  

The most substantial new production this year will come from Australia-based Gorgon LNG, where trains two and three will bring an additional 10 mta to market.  This fiscal year to end-June, Australia is due to have loaded more than 51 million tonnes of LNG.

However, new production is due to peak next year, as a flurry of start-ups help to bring some 36.8 mta on stream.  2018 will be significant for the US, with production due to start at Cameron LNG, Cove Point LNG and Elba Island.

Next year will also be a landmark for LNG production in the Russian Arctic, where the vast Yamal LNG project is due to ship its first cargoes, and off West Africa, where Cameroon’s GoFLNG project is due to go live.

This year, some 33 additional LNG carriers are due to hit the water.  We may well have to wait another 12 months for a better balance between LNG volume and carrier capacity.

Mid-term production prospects are less certain, however.  Low oil and gas prices have dissuaded investors from backing new production.  The third train at BP-backed Tangguh LNG was the only new production project to reach a final investment decision last year.

Analyst McKinsey believes that LNG oversupply may persist until 2024, raising the prospect of a seven-year freeze on investment in new LNG production.  That casts doubt over ENI pressing ahead quickly with its floating LNG project off Mozambique and particularly over Petronas’ proposed Pacific NorthWest LNG project in Canada, where the government delivered its approval in September, tightly packaged in red tape.

If Canada’s LNG-export ambitions are ever less certain, a very different picture may emerge from the US.  This month heralds a new US president, as Donald J Trump is sworn in as the 45th US president.

US-based oil and gas independents see a friend and ally in POTUS45 as the Trump-led administration has pledged to exploit home-grown oil and gas.  Wood Mackenzie is already predicting a flurry of new investment in oil and gas projects from US-based independents, even as the world’s majors cut their costs and scale back their spending….

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Source: LNG World Shipping