Global LNG players jockey for space on a crowded field
Cost inflation and the prospect of LNG cargoes departing from American shores have some analysts questioning the viability of Australian proposals that together would pump some 70 million tonnes of the super-cooled product per year onto global markets.
Noelle Leonard, a Perth-based consultant with Facts Global Energy, suggested yesterday that North American exports could undercut their Australian rivals.
“You’ve got potential for LNG exports in all sorts of places, but the elephant in the room is North American exports because they’re very likely to be cheaper,” he told Bloomberg.
“We’ve probably come to the end of greenfield projects in Australia.”
Against a backdrop of rising costs – Total SA last year bumped the cost estimate for developing its Ichthys offshore gas project to $30-billion, up from earlier estimates of $20-billion – and increased competition, profit margins could be slim.
Bloomberg notes that Japan paid an average price of $16.96 per MMBtu last November, while the cost of cargoes delivered to the island country last month was up 27 per cent, equivalent to roughly $15.36 per million Btu.
Still, there are questions about how big a player the U.S. will ultimately be in the global LNG rush. Legislators in Washington are growing wary of the perceived domestic impact of several proposals on the books to export natural gas from the U.S. Gulf Coast (see chart).
Meanwhile, a February analysis conducted by Wood Mackenzie notes that, post-2018, U.S. LNG exports into the Pacific will “primarily be constrained by competition and by buyer appetite.”
“Higher-cost U.S. liquefaction developments and higher Henry Hub gas prices will likely make proximate Pacific supply options more competitive,” the consultancy says, predicting a best-case scenario of U.S. exports reaching 5 billion cubic feet per day.
Whether or not the fresh assessment speeds investments in liquefaction capacity on Canada’s West Coast is anybody’s guess.