Given the overabundance of liquefied natural gas (LNG) regasification capacity on U.S. shores and the fact that LNG imports this year have been less than half of what they were in 2007, it's tempting to call the U.S. bid for global gas a bust. But like they say about the weather, if you don't like current LNG economics, wait and they will change, some time.
"We do see growth opportunities in the future as more and more LNG production [worldwide liquefaction] gets built," Darryl Kennedy, Total Gas & Power North America director of origination and marketing, told attendees at the LDC Forum Midcontinent in Oak Brook, IL, last week.
Growth in domestic LNG imports will come as the maturing LNG spot market continues to evolve and prices offered in the United States become more competitive with global LNG prices. There is no shortage of U.S. LNG infrastructure, and the domestic market is advantaged by the ready availability of gas storage, Kennedy noted.
"LNG imports to the U.S. are expected to be minimal (similar to volumes received at the end of last year and the beginning of this year) based on projected domestic and global supply/demand imbalances as well as prices," Kennedy said. "LNG imports to the U.S. should increase as the LNG spot market grows, as long as U.S. prices are competitive with global prices."
Not that you could tell from U.S. imports, but global LNG production is on the rise. As of May total LNG production by year-end is expected to be about 194 million metric tons, or 25 Bcf/d, which would mark an 11% increase over 2007 year-end volumes, Kennedy said. "Since 2008, LNG production has grown about 38% (7 Bcf/d)," he said. Further, it is expected to reach 49 Bcf/d in 2015.
Not surprisingly, Asia imports accounted for 63% of total traded LNG volumes as of May, according to statistics from Poten & Partners cited by Kennedy.
Of LNG produced in the Atlantic Basin, 57% goes to Europe, 13% goes to Asia and 30% comes to the United States. However, 100% of LNG produced in the Asia-Pacific region stays there, while 54% of LNG produced in the Middle East goes to Asia, 43% goes to Europe and only 3% comes to the United States, Kennedy said.
Global gas demand is expected to grow to 370 Bcf/d in 2015, with most of the growth being in the Asia-Pacific region. Meanwhile, the flows of LNG continue to become more liquid, with cargoes being redirected en route in pursuit of more attractive prices. "LNG supply will become more flexible (less under long-term contract), which should increase the availability of spot cargoes, leading to a more active spot market for LNG," Kennedy said.
Kennedy conceded that regasification capacity worldwide will exceed liquefaction capacity "well into the future." According to Total statistics, regasification exceeds liquefaction capacity by nearly 41 Bcf/d this year. By 2010 liquefaction capacity is projected to grow to 34.1 Bcf/d from 24.8 Bcf/d now, but regasification capacity will also grow (to 78.8 Bcf/d from 65.2 Bcf/d now), yielding a regasification surplus of 44.7 Bcf/d. By 2015, Total predicts the regasification surplus will shrink to 41.3 Bcf/d.
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