Worldwide spending on the liquefied natural gas (LNG) business is expected to balloon by $39 billion over the next four years, as LNG developers add new liquefaction trains, build new LNG ships and add new LNG import terminals in order to meet growing demand that is led by the United States, according to a new report by UK-based Douglas-Westwood Ltd.

In a report titled The World LNG & GTL Report, Douglas-Westwood determined that capital expenditures in the LNG business over the 2003-2007 period will nearly double that of the previous five-year period.

“We expect over $39 billion to be spent over the period to 2007, over half of which ($20.5 billion) will be spent on constructing a total of 18 new liquefaction trains,” said Douglas-Westwood analyst Steve Robertson. The new liquefaction trains are expected to grow LNG production by 113 million tonnes per year (mmpta).

“LNG carriers are expected to attract the next largest share of the forecasted spending, and we anticipate that the fleet will expand to over 200 vessels by 2007, at a cost of some $11 billion. Nearly $7.5 billion is expected to be spent on developing import terminal capacity, with 21 new import terminals forecast, along with the expansion of two existing terminals.

“In terms of the forecast amount of new liquefaction capacity, the results of our analysis indicate that we will see new facilities offering a total of 78 mmpta of additional output capacity coming onstream between 2003 and 2007,” he added.

Looking at the regional picture, Robertson said this new production capacity will be situated mostly in Africa, followed by Asia and the Middle East. “Overall, we anticipate that Asia will be the leading region in terms of total expenditure, attracting a Capex of nearly $17 billion over the five-year period,” he said. “This represents 40% of the total spend, with activity in this region driven mainly by a large number of orders for LNG carriers, the majority of which have been placed with Korean shipyards such as Daewoo, Hyundai and Samsung.”

As with all new energy infrastructure, but especially with volatile LNG, the report noted that some regions are likely to face challenges when locating new import terminals. Despite an excellent safety record, Robertson said local opposition to new facilities is quite common, and might be even greater with terrorism concerns, noting that this is particularly a problem in North America and Western Europe.

As an example of the difficult hurdles LNG faces, the report cited the 21 months that the Cove Point terminal in Maryland had to wait for a Federal Energy Regulatory Commission approval before it was finally re-opened this year. Part of the hold-up was the terminal’s proximity to a nuclear power facility. Mexico faces similar problems as plans to locate an import terminal in Rosarito — adjacent to a power plant operated by state firm Pemex — were strongly opposed and are now looking uncertain amid suggestions that the necessary land-use permit may be denied.

Robertson said all of the concerns could force more of these import facilities to offshore locations. Some of the plans for current offshore development include ChevronTexaco’s ‘Port Pelican’ development in the Gulf of Mexico, BHP Billiton’s plan to locate a floating terminal 22 miles off the Ventura County coast, and a plan proposed by Cross Gas Energy to locate an offshore terminal near Livorno, Italy.

For more information on the report, contact Robertson at steve@dw-1.com, or visit www.dw-1.com.

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