Advanced Energy Perspectives

ADVANCED ENERGY NOW: LNG Terminal Building Bonanza has Begun

Posted by Maria Robinson

Apr 6, 2015 2:57:00 PM

    

This post is one in a series of feature stories on trends shaping advanced energy markets in the U.S. and around the world, drawn from Advanced Energy Now 2015 Market Report, which was prepared for AEE by Navigant Research. 

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International marine construction companies are seeing a bonanza of new projects as countries around the world approve massive new terminals for liquefied natural gas (LNG) – for imports in most cases, and for exports from North America, Australia, and some Southeast Asian countries. Altogether, this frenzy of port building – at a price tag of around $10 billion apiece – could amount to hundreds of billions of dollars in investment over the next decade as seaborne trade in LNG climbs to meet rising demand, particularly in the energy-hungry countries of China, India, and other Asian nations.

Total deliveries of LNG were flat in 2013 compared to 2012, according to the BG Group, but this masks pent-up demand, as producers in the United States are ramping up export capacity and importing countries are rushing to build import terminals. BG Group forecasts that worldwide LNG demand is expected to increase at a rate of 5% annually through 2025, with much higher rates in the developing countries of Asia.

In September 2014, the U.S. Federal Energy Regulatory Commission (FERC) gave final approval to the Cove Point LNG facility, overruling the objections of environmental groups and bringing to four the number of U.S. export terminals officially approved and under construction. All told, 14 terminals are seeking approval by federal regulators in the United States – on the Gulf Coast, the East Coast, and in the Pacific Northwest. With big potential markets waiting not only across the Pacific, but also in Europe, U.S. oil and gas companies are eager for more export capacity to come online. There are also at least a dozen LNG terminals proposed along the coast of British Columbia.

With unrest in Ukraine giving rise to fears of disruptions of natural gas supplies from Russia, which provides 30% of Europe’s natural gas, European governments and companies are scrambling to build new import facilities. Paradoxically, with international supplies limited and Japan, which relies more heavily on imported natural gas than any other country, soaking up much of the available supply at inflated prices, imports to Europe have declined in the last couple of years. The Gate terminal on the North Sea coast near Rotterdam was built with the support of the Dutch government to maintain the Netherlands’ status as a regional gas hub. It is now running at 10% of capacity, according to The Economist.

Nevertheless, imports from the United States are sure to increase, and the European Union sees the construction of new import terminals as a critical matter of regional energy security. Lithuania, for example, is due to open a massive new floating terminal in early 2015. New terminals are especially important along Europe’s southeastern coast, as countries in the area are essentially captive customers to Russia’s Gazprom.

Amos Hochstein, the acting U.S. special envoy and coordinator for international energy affairs, testified recently before the Senate Foreign Relations Committee, saying that “[there is a] critical need for Europe to improve its energy infrastructure by constructing new pipelines, upgrading interconnectors to allow bidirectional flow, and building new LNG terminals to diversify fuel sources… We support proposals to build LNG terminals at critical points on European coasts, from Poland to Croatia to the Baltics.”

The biggest building boom is underway in China, where three new import terminals came online in 2013 and at least two more were expected to begin operation by the end of 2014. Already, half of the world’s capacity for regasification (the conversion of LNG to conventional natural gas, for transport by pipeline) is located in Asia.

“China’s imports of liquefied natural gas (LNG) are growing at a record pace as it aims to use cleaner fuels to cut smog in big cities, creating a powerful new source of demand that has the potential to reshape the market for the super-chilled gas,” reported Reuters. China’s LNG imports grew 35% in the first quarter of 2014 compared to the same period in 2013.

Meanwhile, new production is emerging from Southeast Asia, particularly in Indonesia and Papua New Guinea. Also, Singapore, which sits at the mouth of the Strait of Malacca, through which passes more than half of the world’s seaborne LNG, has formed ambitious plans to be the LNG trading hub for Southeast and East Asia.

As more LNG terminals come online natural gas will only increase its disruptive force across today’s energy landscape, in both electricity generation and transportation.

Download the full Advanced Energy Now 2015 Market Report to see the full size and growth of the advanced energy market: from LNG terminals to electric bikes to rooftop solar panels. Click below!

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Topics: Advanced Energy Now

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