Page 11 - NorthAmOil Week 22

NorthAmOil COMMENTARY NorthAmOil

New North American liquefaction

capacity in more doubt than ever

Some LNG developers in the US and Canada say they are still targeting final

investment decisions soon, but this seems to be increasingly in doubt

NORTH AMERICA THE outlook for proposed new North Ameri- US LNG operators began the process of convert-
can liquefaction capacity is increasingly bleak ing existing import terminals to liquefaction, as
WHAT: as some developers postpone final investment well as planning greenfield facilities.
US LNG producers have decisions (FIDs). The FID delays thus far have When the first wave of US LNG projects was
already started delaying not been particularly significant in terms of the under construction, the shale gas boom was still
FIDs, and more are additional time allocated – both Sempra Energy a relatively new phenomenon, providing these
expected to be pushed and NextDecade have pushed back an FID on companies access to ample and cheap feedstock
back across North their respective Gulf Coast projects from 2020 gas. Meanwhile, Asian LNG prices tended to be
America. until 2021. Similarly, in Canada Pieridae Energy above the global average, which itself was con-
has extended the deadline for sanctioning its siderably higher than it is today.
WHY: Goldboro LNG project in Nova Scotia from this Asian LNG prices peaked above $19 per mil-
COVID-19 is exacerbating year until June 2021. lion British thermal units ($525.54 per 1,000
the global glut of LNG, However, there are concerns that this could cubic metres) in February 2014, with the global
and expectations for be a sign that more – and considerably length- average at $17.24 per mmBtu ($476.86 per 1,000
FIDs on new capacity are ier – delays are set to follow. Even as numerous cubic metres) over the same month. By contract,
increasingly bearish. countries begin gradually to ease lockdowns, and the most recent available data show the global
demand starts to pick up as a result, the worry is average falling to $1.81 per mmBtu ($50.06 per
WHAT NEXT: that the world could be battling the coronavirus 1,000 cubic metres) in May 2020. Asian LNG
Narrowing differentials (COVID-19) pandemic for some time, and that prices continue to trend slightly higher, aver-
between regional gas the glut of LNG will be around even after the aging $2.03 per mmBtu ($56.15 per 1,000 cubic
prices will challenge the pandemic is over. metres) so far in May, but the significantly nar-
economics of new LNG rowed differential illustrates the broader conver-
projects. In question gence of regional prices for the fuel.
Compounding LNG producers’ worries is the Regional price differentials previously served
fact that differentials between gas prices around as the impetus for developing new LNG projects
the world have narrowed, calling the economics as their owners sought to make a profit by sup-
of LNG projects into question. This marks a con- plying gas to areas of high demand at a high
siderable turnaround from the early 2010s, when cost. However, LNG has been a victim of its own

Week 22 04•June•2020 www. NEWSBASE .com P11