Exports of liquefied natural gas (LNG) from the United States are likely to total less than 10 Bcf/d even if the federal government grants permits to non-free trade agreement nations equaling higher volumes, according to analysts at Navigant Consulting’s energy practice. Market and engineering realities could temper the eventual volumes.
With involvement in many of the proposed U.S. and Canadian LNG export terminal projects, Navigant’s construction experts warn that some of the projects face a number of construction challenges, according to the “NGMarket Notes” report recently released by Navigant’s Rick Smead.
In addition, global LNG market projections and the competing array of new liquefaction production expansions planned outside of the United States indicate that nothing as large as the total 29 Bcf/d of U.S. export applications at the Department of Energy (DOE) are going to be approved and built.
With its current price and infrastructure advantages, Smead said it is probably realistic for the United States to get 25% of the projected additional LNG volumes sold around the world in coming years. A reasonable worldwide LNG growth estimate is 160 metric tons/year, which ironically equals about 29 Bcf/d, the total volume of LNG exports being sought collectively in the applications pending or recently approved by DOE.
“That would suggest that no more than 8 Bcf/d of U.S. new plant capacity will find a stable home in the global markets,” said Smead, citing earlier analyses from his colleagues at Navigant, including Gordon Pickering and Jeff Van Horne, who are not suggesting that the federal permitting process should winnow down the number of projects, but are predicting the market will do that even better.
“There are several factors involved in successful completion of one of these multi-billion-dollar facilities, such as gaining a firm market commitment, securing financing and, of course, clearing all necessary regulatory and siting hurdles,” said Smead, adding that “pervasive cost overruns” have characterized new LNG capacity expansions in Australia.
Navigant’s construction experts have outlined various challenges, including remote, undeveloped locations, a limited pool of contractors who can handle mega-projects; an overheated market’s impact on supply/equipment costs; marine facility construction demands, contractor delays/claims; and “first-of-a-kind” aspects to the process that can add to the risks.
To address these challenges, Navigant’s experts tout an even longer list of “best practices” that proposed project sponsors should consider, ranging from innovative delivery models and modular construction to use of technology advances developed by various suppliers/contractors.
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