The question of who is gaining or losing in the ongoing fight for supremacy on liquefied natural gas, LNG production and supply globally can no longer be measured by mere speculations or conjecture. Apart from peculiarities and uniqueness that characterize fields and locations, government policies and infrastructure issues are further determinants of who becomes the flag bearer. A second wave of projects to bring about 10 million tonnes per annum (mmtpa) of US LNG to the market under binding sales and purchase agreements (SPAs) had begun since early 2018, and they are said to be reaching their starting blocks, giving the US LNG so much momentum.
Speaking at the Gastech conference in Barcelona, Kristy Kramer, director, Americas gas research, at global natural resources consultancy Wood Mackenzie, said: “The increase in SPAs is remarkable. In the period since the first wave of US LNG projects and late 2017, just 2 mmpta had been locked in.”
The US Federal Energy Regulation Commission (FERC) had at the end of August announced regulatory timelines for 12 LNG projects according to Woodmac, with Ms Kramer saying that while six developments had already gone through the regulatory process, 11 more should receive their final order from FERC by mid-to-late 2019.
“At the same time, strengthening fundamentals mean” Wood Mackenzie believes, “that the global LNG supply-demand gap in 2025 will increase from 45 mmpta to 65 mmpta.”
Which also increases the pressure, according to Woodmac, on US LNG projects to finalize commercial arrangements as they look to take FID in the next 12-18 months.
“Gas supply will rise in importance for the next wave of US LNG. The US market will increase by more than 30 billion cubic feet per day (cfd) between 2012, when the first US project took FID, and 2022 when those projects will be online,” Ms Kramer was reported to have said.
The report maintained that in 2022, 36% of US gas would be consumed in or exported through the West South Central census region, which includes Texas and Louisiana, with the concentration of demand meaning that there would be more competition for pipeline capacity to reach new LNG projects.
She added: “This means gas supply should be a focus area for the next wave of US LNG.
“Buyers will need to have comfort in the strategy for getting gas into liquefaction, and lenders will want to be confident in a project’s overall commercial offering.”
“US producers may also be interested in getting into the mix. Notably absent from the first wave, US producers have witnessed LNG exports rise to current levels of over 3 billion cfd. They are expected to approach 10 billion cfd in 2020.
“Producer involvement would likely change the commercial structures and risk-sharing mechanics of future US LNG projects. We are hearing interest from US producers, LNG buyers, and project developers, but have yet to see a big announcement”, Ms Kramer said