february 2016 ceri commodity report — natural gas
TRANSCRIPT
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the Federal Energy Regulatory Commission (FERC) and are already under construction: Sabine (Cheniere-Sabine Pass LNG), Hackberry (Sempra-Cameron LNG), Freeport (Freeport LNG), Cove Point (Dominion-Cove Point LNG), Corpus Christi (Cheniere-Corpus Christi LNG) and Sabine Pass Liquefaction.4 A seventh export facility, the Southern Union-Lake Charles LNG, has been granted FERC approval; DOE authorization is still pending and the facility is expected to be in service in 2020.5 Of the six export facilities under construction, Sabine Pass LNG is leading the way, with Train 1 operational in February 2016. Cheniere began construction of Trains 1 & 2 in August 2012 and Trains 3 & 4 in May 2013.6 Train 1 was initially scheduled to be operational in late-2015 but was delayed. Trains 2 & 3 are scheduled to come online in 2016.7 Each train has a production capacity of approximately 4.5 million tonnes per annum (Mtpa).8 Sabine Pass LNG’s foundation clients include BG Group (Shell), Gas Natural Fenosa (Spain), KOGAS (Korea), and GAIL (India).9 Sabine LNG’s first export cargo, however, was purchased by Petrobras, the Brazilian state-owed oil and gas producer. Sempra-Cameron LNG, located in Hackberry, Louisiana, received approval from the DOE to export up to 12 Mtpa, or approximately 1.7 Bcfpd, of domestically produced natural gas, and received authorization from FERC to operate a liquefaction facility in June 2014.10 Three trains are planned, with Trains 1, 2 & 3 coming online in early, mid and late 2018, respectively.11 The planned expansion (Trains 4 & 5) is currently in the application process and, if approved, will increase the facilities capacity to 24.92 Mtpa, or 3.53 Bcfpd.12 Freeport LNG will have a production capacity of 13.9 Mtpa (or approximately 2 Bcfpd) and is scheduled to be operational in 2018.13 The project was granted FERC and DOE final approvals in November 2014 and is expected to be in commercial operation of its first liquefaction train in 2018, followed by Trains 2 & 3 being completed in February 2019 and August 2019, respectively.14 The fourth export terminal currently under construction is Cheniere’s Corpus Christi LNG export terminal. The
February 2016
CERI Commodity Report — Natural Gas
US LNG: An Update Paul Kralovic February 24, 2016 is an important date in the liquefied natural gas (LNG) landscape in the US, marking the beginning of a shift from a net importer to a net exporter. The tanker Asia Vision is transporting approximately 3 billion cubic feet (Bcf), or 160,000 cubic meters of LNG, from Cheniere’s Sabine Pass LNG facility in Louisiana to Brazil, making it the first-ever domestically-produced LNG export from the Lower-48. It is not, however, the first domestically-produced export from the US. The Kenai LNG export terminal, located in the Cook Inlet area, began operations in 1969. Though the facility was mothballed by ConocoPhillips in 2011, it was restarted in 2014 due to high demand, primarily from Japan.1 In fact, the Kenai LNG was authorized to export the equivalent of 40 BCF of LNG in February 2016 over the next two years.2 With a series of LNG exporting facilities currently under construction, the shift to a net exporter will likely occur quickly, possibly as early as 2017. Interestingly, the last time the US was a net exporter was 1957.3 In the June-July 2015 issue of CERI’s Commodity Report – Natural Gas, the article The Changing LNG Landscape in the US, explored the construction and approval of six LNG liquefaction facilities in the US and the plethora of proposals waiting in various stages of the regulatory approval process. This article will provide an update to the LNG situation in the US. Approved (and Proposed) LNG Export Terminals in the US As of end-March 2016, there are six export facilities that are approved by the US Department of Energy (DOE) and
CERI Commodity Report – Natural Gas Editorial Committee: Paul Kralovic, Dinara Millington, Megan Murphy, Jon Rozhon, Allan Fogwill About CERI The Canadian Energy Research Institute is an independent, not-for-profit research establishment created through a partnership of industry, academia, and government in 1975. Our mission is to provide relevant, independent, objective economic research in energy and related environmental issues. For more information about CERI, please visit our website at www.ceri.ca or contact us at [email protected].
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liquefaction project is comprised of five trains, with a total capacity of 22.5 Mtpa, or approximately 3.2 Bcfpd.15 Construction began on May 13, 2015 and is slated to be completed in 2018.16 Current projections suggest that the first LNG cargo is expected in 2018.17 The project received FERC approval on April 6, 2015 and was originally slated to include only three trains.18 In June 2015, Cheniere Energy announced plans to expand by adding two trains (Trains 4 & 5); the expansion project is slated for completion in 2021.19 Corpus Christi LNG’s foundation clients include Pertamina (Indonesia), Endesa (Spain), Iberdrola (Spain), Gas Natural Fenosa (Spain), Woodside (Australia), EDF Energy (UK) and EDP (Portugal).20 Cove Point, located in Maryland, is the only export terminal under construction that is not located in the US Gulf Coast. Cove Point began receiving LNG from Algeria in 1978 and after a period of disuse the facility was transformed to store domestic natural gas. Dominion Cove Point LNG received approval in May 2015 to build a liquefaction facility to export domestic natural gas.21 Construction of the 5.25 Mtpa facility began in 2014 and is scheduled to be operational in 2017.22 Cove Point has 20-year agreements with Sumitomo Corporation (Japan) and GAIL (India).23 Sabine Pass Liquefaction is a subsidiary of Cheniere Energy Partners (recall Cheniere is also building and operating Sabine Pass LNG and Corpus Christi LNG) and includes Trains 5 & 6, with Train 5 under construction.24
Sabine Pass Liquefaction is a 1.4 Bcfpd facility that has FERC approval and is located at Sabine Pass, Louisiana, adjacent to the aforementioned Sabine Pass LNG.25 All of the above-mentioned LNG export terminals are slated to be operational in the next several years, delivering as much as 10.6 Bcfpd to world LNG markets.26 With the exception of the 2.14 Bcfpd ‘greenfield’ export terminal in Corpus Christi, the remaining export terminals under construction are former import or regasification terminals. These ‘brownfield’ liquefaction projects hold a significant capital cost advantage because many engineering and infrastructure costs were sunk in years past when these sites were being built for regasification purposes. It is important to note that while the current planned additions are fueled by a glut of natural gas and advances in drilling and hydraulic fracturing technology and techniques, the situation in the US was quite different a decade ago. Driven by a
shortage of natural gas, the US was in the process of approving and building LNG import or regasification terminals, satisfying domestic thirst for natural gas amidst decreasing US production. In addition, however, there are currently another 22 proposed export terminals in the US, eight of which are pending applications and the remainder are in the pre- filing stage.27 Of the eight pending applications, six are located in the Gulf of Mexico, one on the southeast coast (Elba Island, Georgia) and one in Oregon (Oregon LNG is located in Astoria, Oregon). It is important to note that on March 11, 2016, FERC rejected the second Oregon- based LNG export terminal, the Jordan Cove LNG application in Coos Bay, Oregon.28 Of the thirteen projects in pre-filing, ten are located in the Gulf of Mexico, with the exception of three facilities proposed in Robbinston, Maine, Jacksonville, Florida and Nikiski, Alaska.29 A single proposed export terminal is pending approval from the US Maritime Administration (MARAD)/ US Coast Guard; the Delfin LNG export facility is a proposed floating LNG terminal to be located in the Gulf of Mexico and lies outside the jurisdiction of the FERC. A Notable Lack of Fanfare Sabine Pass LNG’s first cargo shipment, destined for Bahia Regas Terminal in northeastern Brazil, passed with little or no fanfare. In part, the shift in the LNG landscape in the US is occurring amidst plunging prices of crude oil and natural gas. The current economics of export are challenging, resulting in many of the current proposed LNG export facilities to be postponed or cancelled. While there are several reasons why LNG export projects may not go through, such as environmental challenges or opposition from gas-intensive industries, the lower oil prices are certainly eroding the spread between US and global prices, particularly as low oil prices have reduced the cost of oil-linked contracts that still dominate the industry. The price of natural gas has followed suit. The shale gas revolution combined with abundant reserves within Canada and the US means that natural gas prices have declined steadily over the past several years and is now less expensive in North America compared to other regions. The gap, however, is shrinking. Figure 1 illustrates global natural gas prices dating back to January 2000. The figure shows AECO-C, Henry Hub,
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Europe Border and Japan LNG. The Europe Border price is the European Union’s natural gas import price while the Japan LNG price is the average LNG import price. Prevailing prices reported in the graph are averages of all supplies and largely reflect long-term contracts that price natural gas in terms of a linkage to crude oil. The European Border import price is the average border price, including the UK, and as of April 2010 includes a spot price component.30 Figure 1: Natural Gas Spot Prices (Henry Hub)
Source: CGA31
As of March 21, 2016, the Henry Hub spot price is US$1.79 per MMBtu.32 Likewise, the monthly average for March 2016 is US$1.99 per MMBtu. Aside from a monthly average of US$1.93 per MMBtu in December 2015, March 2016 is the lowest average price since March 1999.33 While international prices are higher, they are dropping quickly. The Europe Border price decreased from US$12.88 per MMBtu on April 30, 2013 to only US$4.90 per MMBtu on February 29, 2016.34 Similarly, the Japan spot price decreased from US$16.58 per MMBtu on December 31, 2014 to US$9.00 per MMBtu on February 29, 2016.35 Compounding lower prices, global demand for LNG has decreased, led by a 5 percent decrease of LNG shipments for Japan, South Korea and China in 2015.36 Japan and South Korea’s decrease is led by a lower demand for gas- fired generation, while China’s lower imports are due in part to a slowing economic growth and an increase in pipeline imports from natural gas-rich neighbours.37 It is not a coincidence that the majority of liquefaction projects are located in the Gulf of Mexico, poised to take advantage of the expansion of the Panama Canal, to be completed in mid-2016. The US$5.2 billion expansion project is large enough to handle the vast majority of the global LNG fleet, cutting the costs and time for LNG vessels departing the US east coast and Gulf of Mexico to
Asian markets of Japan, South Korea and China. The new dimensions will likely open Atlantic Basin LNG to Asian markets. Those markets, however, are currently satisfied by either Middle Eastern or Pacific-Australian Basin LNG. With six liquefaction facilities operational in Australia as of January 2016, and four more under construction (not including Shell’s Prelude project),38 Australia is an up and coming LNG power. If all of the Australian liquefaction is built and comes online as scheduled, more than 10 Bcfpd of LNG will be delivered to customers by the end of 2017. Leading the charge for Middle Eastern LNG is Iran. With untapped natural gas resources and the lifting of economic sanctions, Iran is waiting to develop its hydrocarbon infrastructure. While the projects are not shovel ready, over the next decade it appears that the region’s production will remain at approximately 13.5 Bcfpd.39 It is also important to mention that much of Asian natural gas demand could be met by Russia via pipeline when finished and fully operational. Arguably, the most probable destination for US LNG is Europe. The US may benefit from high European import demand and its desire to minimize its reliance on Russian natural gas. As a result, the US is expected to send about 55 percent of LNG volumes to Europe.40 Currently, the majority of natural gas supply in Europe is met by Norway, Russia and Algeria.41 The liquefaction facilities in the US Gulf Coast are equally poised to take advantage of its proximity to European markets. For example, whereas almost all Australian contracts are fixed-destination, US players can ship almost anywhere in the world, highlighting the destination flexibility of Henry Hub contracts for US producers and shippers. Globally, regasification facilities are being built rapidly, with more than 90 facilities either on-stream or under construction; a further 35 are planned or proposed.42 And while it is unlikely all the US LNG export projects will go ahead as market conditions have certainly changed, a potential range of LNG export capacity somewhere between 10 Bcfpd and 30 Bcfpd is within the realm of possibility for the US over the coming decade. Without doubt, the US is poised to become one of the prominent LNG players over the next decade.
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27FERC, North American LNG Export Terminals – Proposed, Approved as of March 22, 2016, http://www.ferc.gov/ industries/gas/indus-act/lng/lng-proposed-export.pdf 28Bloomberg website, US Rejects Multibillion Dollar Jordan Cove Gas Export Plan, March 11, 2016, Jonathan Crawford and Naureen Malik, http://www.bloomberg.com/news/ articles/2016-03-11/u-s-rejects-veresen-s-5-3-billion-jordan- cove-gas-export-plan 29ibid 30Quandl website, Natural Gas Price, Europe US$/MMBtu, https://www.quandl.com/data/WORLDBANK/WLD_NGAS_EUR -Natural-gas-Price-Europe-mmbtu (Accessed on February 15, 2016) 31Canadian Gas Association, Gas Stats, Chart 4 Global Natural Gas Prices, Price data from graphic is sourced from the US Federal Reserve, World Bank and the CGA, http://www.cga.ca/ wp-content/uploads/2016/03/Chart-4-Global-Natural-Gas- Prices.pdf 32InvestmentMine, Historical Natural Gas Prices and Price Chart, http://www.infomine.com/investment/metal-prices/ natural-gas/all/ 33Energy Information Administration, Henry Hub Natural Gas Spot Price, http://www.eia.gov/dnav/ng/hist/rngwhhdM.htm 34Quandle website, Natural Price, Europe, https:// www.quandl.com/data/WORLDBANK/WLD_NGAS_EUR- Natural-gas-Price-Europe-mmbtu 35Quandle website, Natural Price, Japan LNG Price of Natural Gas, https://www.quandl.com/data/ODA/PNGASJP_USD-Japan -Natural-Gas-Price 36IHS, Weak demand, low prices may spark LNG project cancellations, March 24, 2016, Joseph Bonney, http:// www.joc.com/breakbulk/weak-demand-low-prices-may-spark- lng-project-cancellations_20160324.html 37ibid 38APPEA website, Australian LNG Projects, http:// www.appea.com.au/oil-gas-explained/operation/australian- lng-projects/ 39Rozhon and Fogwill. P. 41. BP Statistical Review of World Energy, 2015. P. 28. 40Bloomberg website, More Than Half of US LNG Is Destined for Europe, WoodMac says, Bloomberg Business, Anna Shiryaevskaya, January 14, 2016, http://www.bloomberg.com/ news/articles/2016-01-15/more-than-half-of-u-s-lng-is- destined-for-europe-woodmac-says 41Oil & Gas Journal website, Today’s lower prices don’t doom future US LNG exports, panel says, Nick Snow, February 9, 2016, http://www.ogj.com/articles/2016/02/today-s-lower- prices-don-t-doom-future-us-lng-exports-panel-says.html 42Global LNG Information website, World’s LNG Liquefaction Plants and Regasification Terminals (As of March 2016), http:// www.globallnginfo.com/world%20lng%20plants%20&% 20terminals.pdf.
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the Federal Energy Regulatory Commission (FERC) and are already under construction: Sabine (Cheniere-Sabine Pass LNG), Hackberry (Sempra-Cameron LNG), Freeport (Freeport LNG), Cove Point (Dominion-Cove Point LNG), Corpus Christi (Cheniere-Corpus Christi LNG) and Sabine Pass Liquefaction.4 A seventh export facility, the Southern Union-Lake Charles LNG, has been granted FERC approval; DOE authorization is still pending and the facility is expected to be in service in 2020.5 Of the six export facilities under construction, Sabine Pass LNG is leading the way, with Train 1 operational in February 2016. Cheniere began construction of Trains 1 & 2 in August 2012 and Trains 3 & 4 in May 2013.6 Train 1 was initially scheduled to be operational in late-2015 but was delayed. Trains 2 & 3 are scheduled to come online in 2016.7 Each train has a production capacity of approximately 4.5 million tonnes per annum (Mtpa).8 Sabine Pass LNG’s foundation clients include BG Group (Shell), Gas Natural Fenosa (Spain), KOGAS (Korea), and GAIL (India).9 Sabine LNG’s first export cargo, however, was purchased by Petrobras, the Brazilian state-owed oil and gas producer. Sempra-Cameron LNG, located in Hackberry, Louisiana, received approval from the DOE to export up to 12 Mtpa, or approximately 1.7 Bcfpd, of domestically produced natural gas, and received authorization from FERC to operate a liquefaction facility in June 2014.10 Three trains are planned, with Trains 1, 2 & 3 coming online in early, mid and late 2018, respectively.11 The planned expansion (Trains 4 & 5) is currently in the application process and, if approved, will increase the facilities capacity to 24.92 Mtpa, or 3.53 Bcfpd.12 Freeport LNG will have a production capacity of 13.9 Mtpa (or approximately 2 Bcfpd) and is scheduled to be operational in 2018.13 The project was granted FERC and DOE final approvals in November 2014 and is expected to be in commercial operation of its first liquefaction train in 2018, followed by Trains 2 & 3 being completed in February 2019 and August 2019, respectively.14 The fourth export terminal currently under construction is Cheniere’s Corpus Christi LNG export terminal. The
February 2016
CERI Commodity Report — Natural Gas
US LNG: An Update Paul Kralovic February 24, 2016 is an important date in the liquefied natural gas (LNG) landscape in the US, marking the beginning of a shift from a net importer to a net exporter. The tanker Asia Vision is transporting approximately 3 billion cubic feet (Bcf), or 160,000 cubic meters of LNG, from Cheniere’s Sabine Pass LNG facility in Louisiana to Brazil, making it the first-ever domestically-produced LNG export from the Lower-48. It is not, however, the first domestically-produced export from the US. The Kenai LNG export terminal, located in the Cook Inlet area, began operations in 1969. Though the facility was mothballed by ConocoPhillips in 2011, it was restarted in 2014 due to high demand, primarily from Japan.1 In fact, the Kenai LNG was authorized to export the equivalent of 40 BCF of LNG in February 2016 over the next two years.2 With a series of LNG exporting facilities currently under construction, the shift to a net exporter will likely occur quickly, possibly as early as 2017. Interestingly, the last time the US was a net exporter was 1957.3 In the June-July 2015 issue of CERI’s Commodity Report – Natural Gas, the article The Changing LNG Landscape in the US, explored the construction and approval of six LNG liquefaction facilities in the US and the plethora of proposals waiting in various stages of the regulatory approval process. This article will provide an update to the LNG situation in the US. Approved (and Proposed) LNG Export Terminals in the US As of end-March 2016, there are six export facilities that are approved by the US Department of Energy (DOE) and
CERI Commodity Report – Natural Gas Editorial Committee: Paul Kralovic, Dinara Millington, Megan Murphy, Jon Rozhon, Allan Fogwill About CERI The Canadian Energy Research Institute is an independent, not-for-profit research establishment created through a partnership of industry, academia, and government in 1975. Our mission is to provide relevant, independent, objective economic research in energy and related environmental issues. For more information about CERI, please visit our website at www.ceri.ca or contact us at [email protected].
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liquefaction project is comprised of five trains, with a total capacity of 22.5 Mtpa, or approximately 3.2 Bcfpd.15 Construction began on May 13, 2015 and is slated to be completed in 2018.16 Current projections suggest that the first LNG cargo is expected in 2018.17 The project received FERC approval on April 6, 2015 and was originally slated to include only three trains.18 In June 2015, Cheniere Energy announced plans to expand by adding two trains (Trains 4 & 5); the expansion project is slated for completion in 2021.19 Corpus Christi LNG’s foundation clients include Pertamina (Indonesia), Endesa (Spain), Iberdrola (Spain), Gas Natural Fenosa (Spain), Woodside (Australia), EDF Energy (UK) and EDP (Portugal).20 Cove Point, located in Maryland, is the only export terminal under construction that is not located in the US Gulf Coast. Cove Point began receiving LNG from Algeria in 1978 and after a period of disuse the facility was transformed to store domestic natural gas. Dominion Cove Point LNG received approval in May 2015 to build a liquefaction facility to export domestic natural gas.21 Construction of the 5.25 Mtpa facility began in 2014 and is scheduled to be operational in 2017.22 Cove Point has 20-year agreements with Sumitomo Corporation (Japan) and GAIL (India).23 Sabine Pass Liquefaction is a subsidiary of Cheniere Energy Partners (recall Cheniere is also building and operating Sabine Pass LNG and Corpus Christi LNG) and includes Trains 5 & 6, with Train 5 under construction.24
Sabine Pass Liquefaction is a 1.4 Bcfpd facility that has FERC approval and is located at Sabine Pass, Louisiana, adjacent to the aforementioned Sabine Pass LNG.25 All of the above-mentioned LNG export terminals are slated to be operational in the next several years, delivering as much as 10.6 Bcfpd to world LNG markets.26 With the exception of the 2.14 Bcfpd ‘greenfield’ export terminal in Corpus Christi, the remaining export terminals under construction are former import or regasification terminals. These ‘brownfield’ liquefaction projects hold a significant capital cost advantage because many engineering and infrastructure costs were sunk in years past when these sites were being built for regasification purposes. It is important to note that while the current planned additions are fueled by a glut of natural gas and advances in drilling and hydraulic fracturing technology and techniques, the situation in the US was quite different a decade ago. Driven by a
shortage of natural gas, the US was in the process of approving and building LNG import or regasification terminals, satisfying domestic thirst for natural gas amidst decreasing US production. In addition, however, there are currently another 22 proposed export terminals in the US, eight of which are pending applications and the remainder are in the pre- filing stage.27 Of the eight pending applications, six are located in the Gulf of Mexico, one on the southeast coast (Elba Island, Georgia) and one in Oregon (Oregon LNG is located in Astoria, Oregon). It is important to note that on March 11, 2016, FERC rejected the second Oregon- based LNG export terminal, the Jordan Cove LNG application in Coos Bay, Oregon.28 Of the thirteen projects in pre-filing, ten are located in the Gulf of Mexico, with the exception of three facilities proposed in Robbinston, Maine, Jacksonville, Florida and Nikiski, Alaska.29 A single proposed export terminal is pending approval from the US Maritime Administration (MARAD)/ US Coast Guard; the Delfin LNG export facility is a proposed floating LNG terminal to be located in the Gulf of Mexico and lies outside the jurisdiction of the FERC. A Notable Lack of Fanfare Sabine Pass LNG’s first cargo shipment, destined for Bahia Regas Terminal in northeastern Brazil, passed with little or no fanfare. In part, the shift in the LNG landscape in the US is occurring amidst plunging prices of crude oil and natural gas. The current economics of export are challenging, resulting in many of the current proposed LNG export facilities to be postponed or cancelled. While there are several reasons why LNG export projects may not go through, such as environmental challenges or opposition from gas-intensive industries, the lower oil prices are certainly eroding the spread between US and global prices, particularly as low oil prices have reduced the cost of oil-linked contracts that still dominate the industry. The price of natural gas has followed suit. The shale gas revolution combined with abundant reserves within Canada and the US means that natural gas prices have declined steadily over the past several years and is now less expensive in North America compared to other regions. The gap, however, is shrinking. Figure 1 illustrates global natural gas prices dating back to January 2000. The figure shows AECO-C, Henry Hub,
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Europe Border and Japan LNG. The Europe Border price is the European Union’s natural gas import price while the Japan LNG price is the average LNG import price. Prevailing prices reported in the graph are averages of all supplies and largely reflect long-term contracts that price natural gas in terms of a linkage to crude oil. The European Border import price is the average border price, including the UK, and as of April 2010 includes a spot price component.30 Figure 1: Natural Gas Spot Prices (Henry Hub)
Source: CGA31
As of March 21, 2016, the Henry Hub spot price is US$1.79 per MMBtu.32 Likewise, the monthly average for March 2016 is US$1.99 per MMBtu. Aside from a monthly average of US$1.93 per MMBtu in December 2015, March 2016 is the lowest average price since March 1999.33 While international prices are higher, they are dropping quickly. The Europe Border price decreased from US$12.88 per MMBtu on April 30, 2013 to only US$4.90 per MMBtu on February 29, 2016.34 Similarly, the Japan spot price decreased from US$16.58 per MMBtu on December 31, 2014 to US$9.00 per MMBtu on February 29, 2016.35 Compounding lower prices, global demand for LNG has decreased, led by a 5 percent decrease of LNG shipments for Japan, South Korea and China in 2015.36 Japan and South Korea’s decrease is led by a lower demand for gas- fired generation, while China’s lower imports are due in part to a slowing economic growth and an increase in pipeline imports from natural gas-rich neighbours.37 It is not a coincidence that the majority of liquefaction projects are located in the Gulf of Mexico, poised to take advantage of the expansion of the Panama Canal, to be completed in mid-2016. The US$5.2 billion expansion project is large enough to handle the vast majority of the global LNG fleet, cutting the costs and time for LNG vessels departing the US east coast and Gulf of Mexico to
Asian markets of Japan, South Korea and China. The new dimensions will likely open Atlantic Basin LNG to Asian markets. Those markets, however, are currently satisfied by either Middle Eastern or Pacific-Australian Basin LNG. With six liquefaction facilities operational in Australia as of January 2016, and four more under construction (not including Shell’s Prelude project),38 Australia is an up and coming LNG power. If all of the Australian liquefaction is built and comes online as scheduled, more than 10 Bcfpd of LNG will be delivered to customers by the end of 2017. Leading the charge for Middle Eastern LNG is Iran. With untapped natural gas resources and the lifting of economic sanctions, Iran is waiting to develop its hydrocarbon infrastructure. While the projects are not shovel ready, over the next decade it appears that the region’s production will remain at approximately 13.5 Bcfpd.39 It is also important to mention that much of Asian natural gas demand could be met by Russia via pipeline when finished and fully operational. Arguably, the most probable destination for US LNG is Europe. The US may benefit from high European import demand and its desire to minimize its reliance on Russian natural gas. As a result, the US is expected to send about 55 percent of LNG volumes to Europe.40 Currently, the majority of natural gas supply in Europe is met by Norway, Russia and Algeria.41 The liquefaction facilities in the US Gulf Coast are equally poised to take advantage of its proximity to European markets. For example, whereas almost all Australian contracts are fixed-destination, US players can ship almost anywhere in the world, highlighting the destination flexibility of Henry Hub contracts for US producers and shippers. Globally, regasification facilities are being built rapidly, with more than 90 facilities either on-stream or under construction; a further 35 are planned or proposed.42 And while it is unlikely all the US LNG export projects will go ahead as market conditions have certainly changed, a potential range of LNG export capacity somewhere between 10 Bcfpd and 30 Bcfpd is within the realm of possibility for the US over the coming decade. Without doubt, the US is poised to become one of the prominent LNG players over the next decade.
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27FERC, North American LNG Export Terminals – Proposed, Approved as of March 22, 2016, http://www.ferc.gov/ industries/gas/indus-act/lng/lng-proposed-export.pdf 28Bloomberg website, US Rejects Multibillion Dollar Jordan Cove Gas Export Plan, March 11, 2016, Jonathan Crawford and Naureen Malik, http://www.bloomberg.com/news/ articles/2016-03-11/u-s-rejects-veresen-s-5-3-billion-jordan- cove-gas-export-plan 29ibid 30Quandl website, Natural Gas Price, Europe US$/MMBtu, https://www.quandl.com/data/WORLDBANK/WLD_NGAS_EUR -Natural-gas-Price-Europe-mmbtu (Accessed on February 15, 2016) 31Canadian Gas Association, Gas Stats, Chart 4 Global Natural Gas Prices, Price data from graphic is sourced from the US Federal Reserve, World Bank and the CGA, http://www.cga.ca/ wp-content/uploads/2016/03/Chart-4-Global-Natural-Gas- Prices.pdf 32InvestmentMine, Historical Natural Gas Prices and Price Chart, http://www.infomine.com/investment/metal-prices/ natural-gas/all/ 33Energy Information Administration, Henry Hub Natural Gas Spot Price, http://www.eia.gov/dnav/ng/hist/rngwhhdM.htm 34Quandle website, Natural Price, Europe, https:// www.quandl.com/data/WORLDBANK/WLD_NGAS_EUR- Natural-gas-Price-Europe-mmbtu 35Quandle website, Natural Price, Japan LNG Price of Natural Gas, https://www.quandl.com/data/ODA/PNGASJP_USD-Japan -Natural-Gas-Price 36IHS, Weak demand, low prices may spark LNG project cancellations, March 24, 2016, Joseph Bonney, http:// www.joc.com/breakbulk/weak-demand-low-prices-may-spark- lng-project-cancellations_20160324.html 37ibid 38APPEA website, Australian LNG Projects, http:// www.appea.com.au/oil-gas-explained/operation/australian- lng-projects/ 39Rozhon and Fogwill. P. 41. BP Statistical Review of World Energy, 2015. P. 28. 40Bloomberg website, More Than Half of US LNG Is Destined for Europe, WoodMac says, Bloomberg Business, Anna Shiryaevskaya, January 14, 2016, http://www.bloomberg.com/ news/articles/2016-01-15/more-than-half-of-u-s-lng-is- destined-for-europe-woodmac-says 41Oil & Gas Journal website, Today’s lower prices don’t doom future US LNG exports, panel says, Nick Snow, February 9, 2016, http://www.ogj.com/articles/2016/02/today-s-lower- prices-don-t-doom-future-us-lng-exports-panel-says.html 42Global LNG Information website, World’s LNG Liquefaction Plants and Regasification Terminals (As of March 2016), http:// www.globallnginfo.com/world%20lng%20plants%20&% 20terminals.pdf.
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