Chris Skrebowski on the dramatic shortage of new LNG mega projects

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14 Jul 2007 |
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Petroleum Review (UK) editor Chris Skrebowski talks about the extraordinary findings in his latest report on liquid natural gas projects with GPM's Julian Darley.

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LNG Mega Projects Report from the July 2007 issue of Petroleum Review:

LNG – few new projects and no project go-aheads

The LNG market currently presents users with a paradox. Demand is booming and rising numbers of countries are looking to LNG imports for increased security of supply and to cover emerging production shortfalls. Yet on the supply side virtually nothing has changed from a year ago in terms of plans for new liquefaction capacity, writes Chris Skrebowski.

The global LNG market currently presents a somewhat mixed picture. The great fear of recent years – that there would not be enough shipping or regasification capacity – has been addressed so effectively that both are now in surplus. In 2006, excess LNG carriers were moved out of the Atlantic trade and into the Pacific trade when freight rates fell in the Atlantic. By the end of the year even this was not enough to balance the market and in the latter half of the year a number of LNG vessels were used as floating storage.

Construction of regasification capacity and operational experience giving higher than anticipated throughputs have largely laid to rest fears about lack of regasification capacity. Current estimates are that European regasification capacity utilisation is in the 45% to 60% range. In the US lack of LNG import demand growth means current regasification capacity is more than adequate and operating at quite low utilisation rates. In fact, LNG imports in 2006, at 16.56bn cm, were below the 2005 level of 17.87bn cm (according to the BP Statistical Review of World Energy 2007).

The key liquefaction capacity side also presents a mixed picture. In 2006 all the expected new capacity came onstream as planned, with the Rasgas II train starting up in December 2006 rather than in early 2007 as previously expected.

For 2007, new capacity appears to be coming onstream on schedule, although so far the only start-up this year has been Equatorial Guinea’s EG LNG project, which delivered its first cargo in May (for more details see p11).

For 2008, the changes from last year’s table are that Qatargas II train 4 is now expected to be commissioned in 2007 and the Donggi project has come in.

For 2009, both the Angola and Gassi Touil projects have slipped to 2010 compared to last year and Brass LNG to 2011. Timing on the Iran LNG project has become uncertain.

Considerable uncertainty remains for projects due to start-up in 2010 and later. In the course of a presentation during IP Week, Andy Flower, an LNG consultant, produced a listing of projects that had been expected to get final investment decisions (FIDs) in 2006 (see pp 40–41 and table on p42). This is because no FIDS have been signed off in the last 18 months.

The reluctance of companies to commit to building new capacity appears to stem from two prime influences. The first is the rapid inflation in construction costs, which is reported to have reversed all unit costs reductions in the last 20 years. This means new liquefaction trains will have markedly higher unit costs than recently built ones. The second uncertainty is the market reaction to high prices. There has been a tendency to believe gas demand is unresponsive to price. This belief in the low price elasticity of gas demand has been undermined by the gas demand falls seen in 2006 in the US, Chile, Austria, France, Hungary, the Netherlands, Portugal, Romania, Slovakia, Russia, Switzerland, the Ukraine, the UK and the Philipinnes. Although special circumstances may account for some of these declines, the general view is that gas prices may have reached the point where demand is impacted. As a result of these two concerns, virtually all LNG projects not underway are currently being reassessed.

The problem is that the lack of new projects is now certain to produce a supply shortfall around 2012. The time from FID to first gas is normally around four years. The just completed Equatorial Guinea LNG project achieved three-and a-half years from FID to first gas, but a number of long lead time items were committed to six months before the FID, so the four-year rule holds.

Project Details Country Operator LNG cap
(mn t/y)
Source field(s) Reserves
(tn cf)
Buyers/
term contracts
Start-up 2008
Donggi LNG 1- or 2-train proposal Cent Sulawesi Pertamina, Medco 3.50/7.00 Donggi field 4.00  
Green LNG (Solimores) 1-train proposal Brazil Petrobras 2.50 BS-400, Santos basin 15.00  
NWS JV (train 5) 5th train Australia Woodside 4.70 Angel, North Rankin + 6 fields*   Far East, USWC
Rasgas III train 6 3rd train Qatar ExxonMobil 7.80 North field 900* US
Sakhalin 2 2 trains Russia Shell 9.60 Pittun and Astokh 17.30 Japanese buyers
Tangguh 1st train Irian Jaya BP, Pertamina 3.80 Wiriagar, Muturi, Berau 14.40 China, Mexico, S Korea
Yemen LNG 2 trains Yemen (Balhaf) Total 6.70 onshore fields (Blk 18 Marib region)   India, Korea, US
Western LNG Western LNG W Niger Delta ConocoPhillips etc 5.00 West Niger Delta fields    

Start-up 2009
Darwin LNG 1st train Australia Woodside 5.30 Sunrise, Troubador, Loxton Shoals 7.70 China, Korea, Taiwan
Mariscal Sucre 1-train proposal Venezuela Venezuela 4.70 Paria Penins. fields, Platforma Deltano 10.00 US, Mexico
MLNG Dua expansion debottlenecking Malaysia Malaysia LNG +1.30 offshore fields    
Oryx GTL Ph 2 3-train facility Qatar Sasol Chevron to 100k b/d North field 900*  
Pars LNG 2 trains Iran NIOC/Total/Petronas 10.00 2bn cf/d South Pars phase 11 280* Europe, Asia and Far East
Peru LNG 1 train Peru Hunt Oil 4.45 Camisea, Pagoreni, Mapaya fields   Mexico, US (Repsol to mkt)
Qatargas II 2nd/5th train Qatar ExxonMobil 7.80 North field 900* UK, Europe
Qatargas III 6th train Qatar ConocoPhillips 7.80 North field 900* US Gulf Coast
Rasgas III train 7 4th train Qatar ExxonMobil 7.80 North field 900* US
Tangguh 2nd train Irian Jaya BP, Petramina 3.80 Wiriagar, Muturi, Berau 14.40 China, Mexico, S Korea

Start-up 2010
Angola LNG (Soyo) 1st train Angola, Soyo Chevron 5 offshore fields 8 US, Europe
Bioko 2nd train proposal Equit Guinea Marathon 4.40 Alba field+ Cameroon/Nigeria gas   BG Gas Mktng to US 17yrs
Brunei – Lumut II 3rd train proposal Brunei Shell 5 to be determined   Japan, South Korea
Gassi Touil (Arzew) 1st train Ain El Bia Algeria Sonatrach 4 Gassi Touil, Rhourde Nouse, Hamra 9 US, Europe
NIOC LNG 2 trains Iran NIOC/BG et al 10 1.94bn cf/d South Pars phase12 280* Europe, Asia
Olokola Ph 1 init 2-train proposal Nigeria Chevron 11 onshore fields   US, Europe
Pearl GTL Ph 1 GTL plant Qatar Shell 70k b/d North field 800mn cf/d 900*  
Skikda rebuild rebuilding Algeria Sonatrach 4.5 onshore and offshore fields    

Start-up 2011
Brass LNG 2 trains Nigeria Total 10 onshore oil and offshore gas fields   US, Europe
Damietta LNG Ph 2 2nd train Egypt BP 5 Nile delta fields   Eni, BP, EGAS
ExxonMobil (cancelled) GTL plant Qatar ExxonMobil 154k b/d North field 1800mn cf/d, 165 k b/d    
Gorgon LNG 2-train proposal Australia Chevron 10 Jansz/lo, Greater Gorgon fields 40 Japan, USWC, China
Idku – ELNG 3rd train Eqypt Egyptian LNG 3.6 WDDM fields 13  
Pearl GTL Ph 2 GTL plant Qatar Shell 70k b/d North field 800mn cf/d 900*  
Persian LNG 2-train proposal Iran NIOC/Shell/Repsol 16 South Pars phase 13, 2.8bn cf/d 280* Europe, Asia, Far East
Pilbara 2 trains Australia BHP Petroleum 6 Scarborough 8  
Pluto LNG 2 trains Australia Woodside Energy 5–6 Pluto + Xena discovery 4.5  
Qatargas IV 7th train Qatar QPC/Shell 7.8 North field 900* North America, Europe
Olokola Ph 2 additional 2 trains Nigeria Chevron 11 onshore and offshore fields   US, Europe
Tassie Shoal 1-train proposal Australia Methanol Australia 2.5      

Start-up 2012
Browse LNG 2-train proposal Australia NWS Woodside 10 Torosa, Brecknock & Calliance fields 20  
Ichthys LNG initial one train Australia NWS Inpex 6 Ichthys    
NLNG 7th train proposal Nigeria Nigeria LNG 8.5 onshore fields   US, Europe
NLNG 8th train proposal Nigeria Nigeria LNG 8.5 onshore fields   US, Europe

Possible Projects
Abadi   Indonesia   4–6      
Alaska LNG studies US, Alaska North Slope ptnrs   North Slope field 32  
Atlantic LNG 5th & 6th train Trinidad Atlantic LNG 10.40 Dolphin, D Deep, Starfish, Cannonball   US, Spain
Darwin LNG Ph 2 1-train proposal (2nd) Australia ConocoPhillips 3.20 Bayu-Undan, Sunrise 3.40 Japan
Darwin LNG Ph 2 1-train proposal (2nd) Australia ConocoPhillips 3.20 Bayu-Undan, Sunrise 3.40 Japan
Bonny LNG 1-train proposal Nigeria NNPC/ExxonMobil 4.80 onshore fields    
Columbia GTL   Colombia BP        
EG LNG 2nd train proposal Equit Guinea Marathon 4.40 Alba field plus regional supply   BG Gas Mktng to US 17 yrs
Iran LNG 2-train proposal Iran NIOC/BP 8 South Pars 280* China MoU from 2008
Iran GTL GTL plant Iran Petro SA   South Pars 600*  
Libya LNG revamp+new cap Libya Shell 0.7–3.2 onshore fields    
MLNG IV 4th train Malaysia MLNG IV 6.8 offshore fields    
Murmansk LNG 2-train proposal Russia Gazprom/partner 12 Shtokman field in Barents Sea 55  
Namibian LNG 1-train proposal Namibia Tullow Oil 5 offshore field 4  
Nigeria floating LNG Nigeria floating LNG Nigeria Shell/Statoil 5 Nnwa and Doro offshore fields   US, Europe
Oryx GTL Ph 3 GTL plant Qatar Sasol/Chevron 200k b/d North field 900*  
Pacific LNG 2-train proposal Bolivia Repsol/YPF 6 Margarita field 13 Mexico, California
Papua New Guinea 1-train proposal Papua NG ExxonMobil 6.5 Hides, Juha and Angore fields    
Pars GTL GTL plant Iran Sasol   South Pars 280*  
Qatar GTL 6-train proposal Qatar Sasol Chevron 130k b/d North field 900*  
Qatar GTL 2 2-train proposal Qatar Qatar 120k b/d North field 900*  
Ras Laffan GTL 2-stage GTL plant Qatar ConocoPhillips   North field 900*  
Sakhalin 2 expansion 1 train (3rd) Russia Shell ? Piltun & Astokh + Exxon Sakhalin I 17.30 Japanese buyers
Snohvit II 2nd train Norway Statoil   Snohvit, Albatross, Askelaad 10.60 US, Europe
Tangguh Ph 2 1 train (3rd) Irian Jaya BP, Pertamina 7.60 Wiriager, Muturi, Berau 14.40 China, Mexico, S Korea
*Total in field; **plus 400mn barrels of condensate; ***plus 300mn barrels of condensate. Sources: Petroleum Review databases
Table 1: Current global gas megaprojects

AudioChris Skrewbowski on the latest LNG projects (audio) (length 30 min.): download, stream