World wide liquefaction capacity for natural gas is expected to increase three-fold by early 2011, but only a portion of the incremental capacity will be earmarked for the U.S. market, as the appetite for liquefied natural gas (LNG) also is soaring in Europe and Asia, according to a new study issued by Energy Ventures Analysis (EVA).
EVA projects that 56 new liquefaction projects will be built in the world during this time period, resulting in the likely addition of 38.6 Bcf/d in new liquefaction capacity by 2011.
The Arlington, VA-based energy consulting firm expects the United States to capture the biggest chunk (44%) of the Atlantic Basins's 9.1 Bcf/d of supply from new liquefaction facilities between 2003 and 2010, with Europe following closely at 37%. EVA estimated that 21% of the Atlantic Basin planned liquefaction supplies are uncommitted.
It sees Europe snaring 41% of the 7.7 Bcf/d of new LNG supply in the Middle East, with the U.S. getting less than half of that (20%). EVA believes that nearly 30% of the Middle East's LNG incremental supplies will go to the Asian markets during this decade. It said only 9% of the new supplies from the Middle East (10 trains and two expansions) were uncommitted.
As for Pacific Basin liquefaction, EVA sees as much as 64% of the 8 Bcf/d of LNG supplies from the new liquefaction facilities going to the Asian markets, including Japan and China, and 27% of the market uncommitted and the U.S. poised to receive only 11% of the LNG pie by 2010. Fifteen liquefaction trains are expected to be on-line in the Pacific Basin by 2010.
On a composite basis, LNG supplies from new liquefaction facilities will be divided fairly evenly between the three markets, with Europe, Asia and the U.S. capturing approximately 27% of the supplies from the new liquefaction facilities, said the EVA report, which is called the "Outlook for LNG: An Intelligent Assessment."
The study says that 88 new regasification projects, totaling 75.6 Bcf/d, have been planned for the North American gas market. This is in addition to the planned expansions of the existing four U.S. regasification terminals, which will reach a capacity of 5 Bcf/d by 2009, it noted. This compares to a capacity of only 1.1 Bcf/d at the end of 2001.
EVA predicts that less than one-fifth of the proposed regasification projects, or only 15, are likely to be completed. "At present eight of these likely projects are under construction -- this includes all three of the Energy Bridge regasification ships as separate projects -- and two more [are] likely to begin construction by year-end 2005. The remaining projects are for the most part being developed by the majors and currently are in the final stages of the permitting process," according to the study.
"Most of these new regasification projects are located either in the Gulf of Mexico (i.e. about two-thirds of the new capacity) or in neighboring countries that will serve the U.S. market..., as only two of 27 projects proposed for the East and West Coasts are considered even possible at this time, primarily because of the strong concerns over environmental factors and threats of terrorism."
The evolution of a robust short-term, or spot, market for LNG is likely to be of significant importance to future levels of U.S. LNG imports, EVA said. "While further growth in the short-term, or spot, market for LNG appears to be almost a certainty, expectations that the global LNG market will become analagous to the U.S. Henry Hub spot market should be tempered" because of the number of major barriers, it noted.
Some of the barriers include: existing contracts, which are based upon the rigid traditional model for LNG; security of supply, which remains a central concern for the Asian region and is best fulfilled by a long-term contract; and investment risk for the developers of liquefaction and upstream facilities requires at least a portion of the capacity of a liquefaction facility be secured by long-term contracts.
But "even with these barriers, it is anticipated that the short-term, or spot, market will reach about 20% of the total LNG market by 2010. This increasing percentage of the market, in combination with the more than doubling of the overall global LNG market, likely will result in the short-term...market for LNG increasing from 1.6 Bcf/d in 2003 to about 8 to 10 Bcf/d by 2010," EVA said.
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