Long-term gas demand trends worldwide will support a "bright future" for liquefied natural gas (LNG), but most of the development action will be in the Pacific Basin, according to a new report from Douglas-Westwood. The Pacific Basin is expected to be "the main contributor" to a 10-year global investment high of $26 billion annually by 2015, the firm said in a new report.
"World LNG Market Report 2011-2015" suggests that much of the sector's growth will be driven by an abundance of promising liquefaction projects in Australasia and import facilities in Asia.
"Last year saw recovery in LNG demand, led by Asian consumers. China, in particular, has seen its LNG demand grow from 1 Bcm [billion cubic meters] in 2006 to around 13 Bcm today. LNG imports to Western European and Latin American countries have also increased," said report lead author Lucy Miller. "In addition, we have the prospect of increased demand for natural gas as the world considers the future of nuclear energy in the aftermath of the Japanese crisis."
A lower level of spending on LNG facilities is expected over the coming years relative to pre-2009 levels, the report said. However, the market is expected to recover and investment should reach about $26 billion by 2015. Capital spending (capex) on LNG facilities for the 2011-2015 period is expected to total more than $93 billion.
North America's share of global LNG capex is expected drop to 5%. Much of the $4.7 billion forecast for the 2011-2015 period will come from liquefaction projects as the import terminals in the region suffer from underutilization, Douglas-Westwood said.
"On the supply side, 2010 saw the commencement of major construction work on new facilities in Australia and Papua New Guinea," Miller noted.
Over the next five years Asia is expected to remain the largest region for LNG construction activity, accounting for $36.8 billion, or 40%, of global capex, the report said. "However, the region's dominance over LNG expenditure will be rivaled by Australasia towards the end of the forecast period as the latter sees an increase in liquefaction terminal construction activity."
The Middle East is expected to significantly decline in importance over the next five years as major projects have been completed, Douglas-Westwood said. Despite being the world's largest LNG exporting region, the Middle East is forecast to account for $2.2 billion, or 2%, of expenditure between 2011 and 2015, compared to $21.6 billion, or 21%, in the 2006-2010 period, the report said.
Recent years have seen development of larger liquefaction trains of up to 7.8 million metric tons per year, according to the firm's analysis. The larger trains compensate somewhat for rising capital requirements and help sustain the economic viability of LNG as a solution for bringing gas to market, the report said. The emerging floating LNG liquefaction sector is also the focus of much research and development and potentially opens a large resource of offshore stranded gas, according to Douglas-Westwood.
Floating regasification solutions are also becoming increasingly popular due to shorter lead times and favorable cost comparisons with their onshore equivalent, the report said.
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