Increase in investment critical to addressing LNG supply gap challenge
05 December, 2019
It is estimated more investment in projects are needed to fill the expected LNG supply gap in the mid-2020s when new capacity is under construction, making project success a priority in the industry, according to a new report by the Energy Industries Council (EIC).
As countries worldwide strive to meet air quality and climate targets and seek a change in their energy mix, it has been forecasted by the International Energy Agency (IEA) that gas will overtake coal as the second leading source of energy consumption by 2030.
The EIC Insights report: ‘Global outlook for LNG liquefaction and regasification,’ provides a detailed overview on the role natural gas must play in overcoming the energy challenge of meeting consumer demand while minimising carbon emissions.
It focuses on LNG which is produced by cooling gas in a refrigerated cycle at -160oC into liquid form, and provides an outlook on activity in key markets, challenges and positives in the industry and a brief review of recently awarded contracts and LNG project developments. Some of the barriers and challenges LNG projects have faced stem from overbudgets, time delays, environmental resistance, final investment decisions uncertainty and supply chain management
Speaking at the Budapest LNG Summit this week, Neil Golding, Head of Oil and Gas at EIC, said: “The LNG market represents significant opportunities for the supply chain as projects continue to evolve and a key focus is keeping a handle on costs of the developments and for the projects to be delivered on schedule. New innovations are evolving including several smaller small-scale projects where floating liquefaction is used to tap remote gas fields and unlock stranded resources.
“Modularisation is continuously growing, as it offers a benefit especially for remote projects achieving faster execution. Equally important is the role LNG will have in the Energy Transition both globally and in the UK. The UK has a key role to play with significant import capacity and see’s proposals to increase capacity to help meet future energy needs.”
Key findings include:
- Current global liquefaction capacity which is approximately 430 mtpa is due to increase by an estimated 295 mtpa of capacity under construction
- The US which is now a net exporter of natural gas following the shale boom is projected to account for the highest growth in liquefaction capacity till at least 2026
- The current global capacity for regasification, is approximately 830 mtpa with an estimated 130 mtpa of capacity under construction
- India is projected to account for the highest increase in capacity within the period until 2025, and China becoming the top importer of LNG
- The capacities of the projects that have reached FID this year stands at 62.7 mtpa which is almost double of what was reached from 2016-2018 (34.8 mtpa) combined
- Mozambique is developing projects which could put it in a position to be one of the leaders in the LNG export market
Tayo Idowu, EIC Midstream & Downstream Energy Analyst and author of the report, commented: “As LNG continues to grow in new markets like vessel bunkering, partly due to the International Maritime Organisation’s 2020 regulation to reduce sulphur limit in fuel oil to 0.5%, and countries diversifying their energy mix with gas, there is increasing competition amongst exporters for market share.”