LNG projects ramp up in response to growing market

  • The giant LNG ship Al Nuaman, which carries some 200,000 cubic meters of liquefied gas, arrives in the Baltic port of Swinoujscie, Poland, on Dec. 11, 2015, after 21 days of travel from Qatar. Qatar plans to expand its LNG capacity by 23 million tonnes by 2023 — jumping to 100 million tonnes a year. (Photo/Lukasz Szelemej/AP)

Oil and gas companies are responding to the growing market for liquefied natural gas by ending their hiatus from new projects, while more liquefaction capacity is coming online in Russia, Australia and the U.S. Gulf Coast.

LNG projects under construction or anticipated to reach a final investment decision within the next 12 months total more than 125 million tonnes of annual output capacity — more than a one-third boost to global capacity as reported by the International Gas Union’s 2018 annual report.

Not sitting still as the market grows, world leader Qatar plans to expand its LNG capacity by 23 million tonnes by 2023 — jumping to 100 million tonnes per year. Qatar Petroleum has signed a contract for front-end engineering and design of three new liquefaction trains — the world’s largest — and drilling could start next year to develop additional gas reserves, S&P Global Platts reported.

Qatar last year lifted its 12-year-long moratorium on new gas production.

Nigeria, the world’s fourth-largest LNG exporter, is taking steps to expand its LNG production capacity by a third, Bloomberg reported. Nigeria LNG, a venture of the state-owned oil company and three oil majors, signed engineering and design contracts July 11. A final investment decision could be taken late this year. The plan would boost annual capacity to 30 million tonnes by 2024.

Nigeria’s seventh liquefaction train could cost as much as $6.5 billion to build, with an additional $5 billion for the wells and pipelines to supply the expansion.

Working to add Mozambique to the list of 20 LNG-exporting nations, ExxonMobil plans to expand its proposed Rovuma project to cut production costs as the company and its partners prepare to formally tap lenders this fall, Bloomberg reported.

ExxonMobil looks to build two liquefaction trains — at 7.6 million tonnes each. “The larger train design will lower the unit cost … and ensure a competitive new supply for the global LNG market,” a spokeswoman said. Under plans submitted to the government, Exxon proposes a 2019 final investment decision with a 2024 start-up.

Anadarko plans to raise $14 billion to $15 billion from banks and export credit agencies as it lines up long-term sales to guarantee loans for its own LNG project in Mozambique, Reuters reported. The facility would start at 12.88 million tonnes a year. Partners include Mitsui of Japan and ONGC Videsh of India.

Anadarko said it has made enough progress with customers, government approvals, financing and preparing for construction to make an investment decision within 12 months.

In addition, Italy’s Eni also is investing heavily in Mozambique. It leads a consortium that last year gave the go-ahead for an $8 billion floating LNG project called Coral, with a capacity of 3.4 million tonnes per year and a planned 2022 start-up.

ExxonMobil is looking to possibly double output at its four-year-old Papua New Guinea LNG project, adding 8 million tonnes annual capacity, Interfax Global Energy reported. The Australian Financial Review reported the cost of expanding gas production and LNG capacity could reach $12 billion.

Much closer to Alaska, Shell and its partners in LNG Canada are expected to decide later this year whether to start construction in Kitimat, B.C. The first phase would provide 13 million tonnes a year of capacity, with a potential expansion to double that, Canada’s Globe and Mail reported.

Shell’s partners include Malaysia’s Petronas, PetroChina, Mitsubishi and Korea Gas. Petronas bought into the venture in May after it abandoned its own multibillion-dollar LNG terminal in British Columbia last year. Including a 415-mile gas pipeline from northeastern B.C. and other costs, LNG Canada could total C$40 billion.

Also looking at the Asia market, the $27 billion Yamal LNG project in Russia’s Arctic expects to complete construction of its second and third liquefaction trains by early 2019, reaching full production capacity of 16.5 million tonnes. The Yamal leader, Russian gas producer Novatek, already is making plans for a second Arctic project at almost 20 million tonnes, with an investment decision by 2019.

China National Petroleum Corp. is a 20 percent partner in Yamal LNG. It also is in talks to take an equity stake in Arctic LNG-2, according to TASS, the Russian news agency.

In addition to taking an equity stake in production, China is signing up for new supplies. The Australian Financial Review reported that PetroChina signed a three-year contract with Papua New Guinea LNG for 450,000 tonnes per year, starting in July.

The deal turns PetroChina from a regular buyer of spot cargoes from the terminal into a firm customer and could pave the way for a larger, longer-term contract to help underpin the proposed expansion in Papua New Guinea. “This could be the getting-to-know-you deal,” said Tony Regan, a director of LNG consultancy DataFusion Associates in Singapore.

Meanwhile, $200 billion of LNG investments in Australia is coming near an end, with the last two projects — Shell’s Prelude and Inpex’s Ichthys — expected to start production late this year or early 2019, with total capacity of 12.5 million tonnes.

On the U.S. Gulf Coast, most of the activity has involved adding liquefaction and export to underutilized or unused LNG import terminals.

• Cheniere is continuing to expand its Sabine Pass, La., plant, building a fifth train to add another 4.5 million tonnes of capacity, while marketing a proposed sixth unit.

• Cameron LNG in Louisiana, led by Sempra Energy, has three trains under construction at almost 13 million tonnes and a fourth with all its permits. Developers need only to secure buyers for the train before taking an investment decision.

• Three trains are under construction at Freeport LNG in Texas, totaling 15 million tonnes, while plans for a fourth have been submitted to regulators.

• Reuters reported that start-up of the $2 billion, 2.5-million-tonne Elba LNG export terminal in Georgia is delayed to late 2018.

• Three more Gulf Coast projects have federal approval but lack investment decisions. Two would be repurposed LNG import terminals – the 16-million-tonne Lake Charles project, led by Shell and a Texas pipeline company, and 15-million-tonne Golden Pass terminal, led by Qatar and ExxonMobil.

And though a greenfield project, without an LNG import terminal, Cheniere is developing its Corpus Christi plant in Texas in a similar phased approach to the brownfield projects, with two trains under construction, at 4.5 million tonnes each, while a third reached final investment decision in May after China National Petroleum Corp. signed on as a buyer.

Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Updated: 
08/01/2018 - 10:49am

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