Global LNG: New pricing ahead?
Over the industry’s last five decades, we have seen a progressive broadening of the LNG supply base, with three waves of suppliers.
Between 2000 and 2012, liquefaction capacity more than doubled, driven primarily by the series of massive LNG developments in Qatar and the early Australian developments.1 The first wave was dominated by Algeria, Malaysia and Indonesia, which still collectively accounted for more than 60% of total LNG capacity as recently as 10 years ago, but which are expected to drop to about 20% of total capacity by 2020. The second wave has been dominated by Qatar and Australia, which have been rising rapidly from about 20% of global LNG capacity in 2000 and are expected to account for about 50% of total global capacity by 2020.
Global LNG capacity and demand
Source: EY assessments of data from multiple sources
By 2025, the global LNG market should have room for all of the projects that are currently seen as “possible.” However, unless there is substantially higher growth in LNG demand, building a significant number of the “speculative” projects implies increasing supply-side competition.
The new exporters — North America and East Africa
As of late January 2013, 20 companies have submitted applications for US LNG export.
Current US law requires an export license from the US Department of Energy (DOE) in order to export LNG. In general, export of LNG to a nation that has a free trade agreement (FTA) with the US is considered in the public interest and is typically approved without modification or delay.
At present, the US has FTAs with 19 countries, five of which currently import LNG (Canada, Mexico, the Dominican Republic, Chile and South Korea), with a sixth country, Singapore, set to have import capacity in 2013.
In offshore East Africa, the recent tremendously successful discoveries of natural gas are, in the words of the analysts at Macquarie, simply too big to overlook.4 The discovered resource base could theoretically support exports of up to 70 mtpa, but since the exploration phase is far from over, that estimate could easily rise to 100 mtpa.
- 1 J.P. Morgan Cazenove Global Equity Research, Global LNG, 13 January 2012