Liquefied natural gas (LNG) demand and production may be slowing as a result of price and project cost increases, according to a recent study prepared for Repsol Energy North America (RENA) by Jensen Associates. Supply and demand trends suggest a currently tight market will loosen, creating opportunities for long-range contracting as well acting as a counter to further price increases.
The Boston-based consulting firm estimates that global LNG production capacity grew by 2 Bcf/d, or 9%, in 2006, led by projects in Nigeria, Oman and Australia. Jumps in construction costs, coupled with disputes over revenue shares between industry and governments, have since affected LNG schemes.
"Since it takes four years or more to bring a new LNG plant on stream from a decision to proceed, supply has been very slow to catch up with demand. However, plant construction decisions that were set in motion earlier in the decade will bring a surge of new plant completions on line in the period of 2009-10," the study predicts.
"The possible slowdown in the growth of LNG demand, coupled with the surge of new plant construction in the 2009-10 period, has the potential to create a surplus." By 2011, the consultants foresee global LNG capacity likely reaching 36.5 Bcf/d, up 50% from current operating capacity estimated at just over 24 Bcf/d.
The Jensen Associates study was included with the application to the National Energy Board by RENA and affiliate Repsol Energy Canada Ltd., offshoots of Spain's Repsol YPF SA, for an import/export license for LNG, which could start landing in New Brunswick late this year, with most of the natural gas bound for the U.S. Northeast (see separate report).
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