Page 12 - NorthAmOil Week 22

NorthAmOil COMMENTARY NorthAmOil

success to some extent, with the increasing avail- than some of the brownfield ventures on the
ability of volumes available on the market help- Gulf Coast that converted import terminals to
ing to lower the price of the fuel dramatically. exports. Thus the field has been considerably
Now this has been significantly exacerbated thinned out as LNG prices have fallen, while the
by the impacts of COVID-19, with the Inter- oil price collapse has hit developers’ earnings,
national Energy Agency (IEA) predicting that also causing them to rethink plans.
global gas demand will decline for the first time In the US, a number of the remaining pro-
in over a decade this year. Long-term predictions posals also involve greenfield developments,
appear more unreliable than ever. and their economics look shakier than ever
Without significant regional price variations, now. LNG producers have continued to talk
the cost of liquefying natural gas and shipping it up the prospects of their planned facilities,
over long distances may no longer make sense. but such assurances come with the caveat that
And while there were initially hopes that closely decisions will be taken based on market condi-
aligned prices would be short-lived, it is now tions, and market conditions continue to look
being suggested that this may not turn out to be unfavourable.
the case. Previous expectations were that by the mid-
A Center for Strategic and International 2020s, the glut of LNG would ease, making space
Studies senior fellow, Nikos Tsafos, was cited by for more supply to enter the market. Indeed,
the Financial Times this week as saying that over many of the FIDs taken last year were grounded
the past decade the LNG market organised itself on these assumptions. However, as demand
around large price disparities between North continues to take a battering such assumptions In the US, a
America, Europe and Asia. are being called into question and it is being sug-
“And now we’re headed in a world where that gested that there may be far less room for new number of
may not be true; it may not be true for a long liquefaction capacity to start up in the medium the remaining
time,” Tsafos told the newspaper. “It may not be term.
true ever. You may never get back to the types of “We don’t see any additional North Amer- proposals also
disparities you saw over the past 10 years.” ican export capacity getting sanctioned in the
next decade,” an LNG analyst at S&P Global involve greenfield
What next? Platts, Ross Wyeno, told the Financial Times
Such suggestions come after numerous warnings this week. developments.
in recent years that not all of the proposed lique- The International Gas Union (IGU) recently
faction capacity in North America would ulti- estimated that there was around 907.4mn tonnes
mately be built. Indeed in Canada, the decline per year (tpy) of planned liquefaction capacity
of LNG prices has already led to a number of at the pre-FID stage. The US and Canada are
project proposals falling by the wayside. At one estimated to account for the bulk of this with
point, there were around 20 LNG terminals 350.5mn tpy and 221.8mn tpy respectively, or
proposed for the British Columbia coast. Now a combined 572.3mn tpy. The IGU warned that
one mega-project – LNG Canada – has been not all of the planned global capacity was needed,
sanctioned, and only a handful of other propos- and only the most competitive projects would
als remain active. The fact that all of Canada’s move ahead. It now looks as though fewer and
LNG projects were greenfield ventures meant fewer projects are set to count as being among
they had significantly higher development costs the most competitive.™

P12 www. NEWSBASE .com Week 22 04•June•2020