The State of Global LNG Industry: Analyses, Project Developments, Outlook
By Ndubuisi Micheal Obineme
The global energy crisis has shown the significance of adopting a diversified energy system across the energy value chain to address issues of Energy Security, Affordability, and Sustainability. Liquefied natural gas demonstrated essential value as a flexible, reliable, available energy source in this unprecedented time.
During the global energy crisis, liquefied natural gas played a key role in securing the global energy supply, especially in Europe. LNG ultimately saved the day, maintaining Europe’s energy security and assisting the Continent to make it through the 2022 winter.
This feature story titled ‘The State of Global LNG Industry’ provides a comprehensive analysis of the latest developments across the LNG industry, coupled with the progress made so far on global LNG trade and investments, including the outlook and uncertainties emanating from the Russia-Ukraine war that affected the LNG industry, with emphasis on stakeholders commentaries on key recommendations to strengthen the LNG industry to become a reliable and sustainable energy source.
Historically, coal and oil have traditionally dominated the global energy space as fuels over the years. However, the resulting threats of global warming and the climate crisis coupled with the energy transition agenda have forced a collective re-evaluation of changes toward a low-carbon future. The natural gas and LNG industry has been evolving and has become a focus area for clean energy production since it burns the cleanest of all fossil fuels.
Over the past three years (2020 – 2022), the LNG market experienced several uncertainties caused by the COVID-19 pandemic in 2020, including the extraordinarily rapid economic rebound post-COVID-19 in 2021 and Russia’s invasion of Ukraine in 2022, which led to the global energy crisis as well as undermining LNG demand and supply growth potentials across the world.
Global LNG demand and supply are one of the main factors for assessing the growth opportunities in the LNG industry. The market tightness from 2021-2023 which began in the aftermath of the COVID-19 pandemic in 2021, triggered global energy shortages and increased prices in oil, gas, and electricity markets coupled with the Russia-Ukraine conflict also created an imbalance in the global LNG market in terms of demand and supply.
Europe Energy Crisis
Before Russia invaded Ukraine, the European Union was highly dependent on Russian energy resources. In 2021, European countries imported 155 billion cubic meters (bcm) of Russian gas, which accounted for about 45 percent of total gas imports to the European continent.
“Russia was the number 1 oil exporter, number 1 natural gas exporter of the world, and the main exporter of natural gas to Europe as of 24th of February 2022,” said Dr. Fatih Birol during his keynote speech at the 12th edition of the LNG Producer-Consumer Conference 2023, organized by Japan’s Ministry of Economy Trade and Industry in partnership with the International Energy Agency.
However, the ongoing Russia-Ukraine conflict made European countries diversify their energy supply away from Russian supplies, including pipeline gas.
Liquefied natural gas became a quick alternative for European energy security. Europe became the epicenter for LNG demand in 2022 and it triggered inter-regional competition for marginal spot cargoes between Europe, Northeast Asia, and South Asia. European countries purchased large amounts of LNG from other suppliers which made gas and LNG prices increase to all-time highs and it forced other key markets such as Asia to slash LNG purchases and curtail plans for new LNG imports during that period. The sudden boom in LNG demand in Europe has resulted in a massive redirection of LNG flows.
Before the Russia-Ukraine war, a GECF report titled ‘Global Gas and LNG Prices in 2020’ revealed that European and Asian spot gas and LNG daily prices ranged from US$7-9/mmBtu in January 2019, after which they sharply declined over Q1 2019 and converged between US$4-5/mmBtu at the end of May 2019.
According to the GECF report, “At the start of 2020, prices were relatively weak with daily prices hovering in the range US$2.00-5.50/mmBtu.
“The Northeast Asia (NEA) Spot LNG price was at a premium to European LNG prices in January 2020, however, this quickly deteriorated and it slumped to record lows of US$1.68/mmBtu on 30 April 2020.
“Over the period 22 April – 8 May 2020, daily spot and LNG prices converged to below US$2/mmBtu. Another anomaly observed was the fact that Henry Hub (HH) became the most expensive gas on 23 April 2020 at US$1.86/mmBtu whilst the National Balancing Point (NBP), Title Transfer Facility (TTF), and NEA Spot LNG were US$1.47/mmBtu, US$1.80/mmBtu, and US$1.81/mmBtu respectively.”
Title Transfer Facility (TTF) is a pricing location within the Netherlands. TTF has become the most liquid pricing location in Europe, and as such, oftentimes serves as a pricing proxy for the overall European LNG import market. Europe relies strongly on the spot market to secure LNG supplies, with about 70% of its 2022 imports sourced through spot buying in 2022. Platts JKM, the Japan Korea Marker, reflects the supply and demand dynamics of cargoes delivered ex-ship into the world’s largest LNG importing countries – Japan, South Korea, China, and Taiwan. These locations equate to the majority of global LNG demand.
As a result of Russia’s invasion of Ukraine, Europe’s high demand for LNG made spot prices increase drastically as the premium price for Title Transfer Facility (TTF) reached US$84.76/MMBtu on August 26th, 2022. While the Platts JKM stood at USD$84.7/MMBtu. On the other hand, the Platts TTF reached a record high of $93.813/mmBtu on 26 August 2022, while the Platts JKM benchmark hit an all-time high at $84.762/ mmBtu on 7 March 2022, according to IGU 2023 World LNG Report.
“Russia’s invasion of Ukraine triggered a major global energy crisis in the energy, oil, and gas industry. Thanks to the efforts of European countries and finding an additional energy source such as LNG.
“In Europe, we can see that there was no economic recession last year and major breakouts in electricity supply. Europe is fortunate to respond quickly and put in place the right policies to sustain the continent’s energy demand as well as going through the winter without any problems,” Birol noted.
Commenting on IEA’s response to the energy crisis, Birol stated that IEA has developed a ‘Ten-Point Plan’ on what the European countries should do to address the energy crisis, noting that natural gas will play different roles in the global energy market, but, the challenge is how to balance the near-term needs of additional gas supply as the global energy market is volatile at the moment.
“The next winter is coming, and there may be some difficulties. Therefore, the member countries of IEA created a task force on ‘Gas and Clean Fuels Market Monitoring and Supply Security’. The mandate of the task force is to identify short-term solutions to enhance energy security as well as resilience against the threat of future gas supply cuts. Many countries have given us support as the task force is chaired by Canada and co-chaired by Ireland, Japan, Spain, and the United States of America.
According to him, IEA believes that there is an urgent need to develop strategies to support investments in gas infrastructure, including incorporating technologies like carbon capture and storage in the energy value chain and enhancing the integration of low-emission gases.
He added that Russia’s invasion of Ukraine didn’t only affect Europe, but, it triggered a major energy crisis in many parts of the world, which made the price of natural gas increase drastically.
A report published by The Institute for Energy Economics and Financial Analysis (IEEFA), stated that if the Russia-Ukraine war continues, it could trigger a supply glut by making the financial and pricing markets for LNG exporters and traders more intense. This would lead to supply disruptions and long-term financial risks throughout the LNG value chain.
IEEFA report reads, “In 2022, European countries boosted LNG imports by 60% to make up for declining pipeline gas shipments from Russia. Europe’s red-hot LNG demand drove global spot prices to all-time highs, forcing price-sensitive Asian buyers to slash LNG purchases and curtail plans for new LNG imports.
“China cut 2022 LNG purchases by 20%, due to a combination of high prices, COVID-19 shutdowns, and slower economic growth. High LNG prices have pushed the country’s gas buyers to rely more heavily on domestic production and pipeline imports.
“India, Bangladesh, and Pakistan slashed LNG demand by a combined 16% last year. Concerns over fuel security, unaffordability, rapidly depleting foreign currency reserves, and demand destruction could limit the region’s medium-term LNG imports.
“Southeast Asian buyers face challenges from high prices and infrastructure constraints. Long-term LNG contracts with deliveries starting before 2026 are reportedly sold out globally, forcing Southeast Asian countries into expensive spot markets.
“In Japan and South Korea, high LNG prices accelerated a resurgence of nuclear power generation that could slash power sector gas demand. In Taiwan, persistent terminal delays and state-owned utility financial difficulties could constrain rapid increases in LNG imports.
“Europe’s LNG demand could remain strong in 2023 but is poised to fall, as EU climate and energy security policies curtail gas demand by at least 40% through 2030. Although new LNG terminals could boost the continent’s import capacity by one-third by the end of 2024, Europe’s ambitious energy transition targets mean that much of the new capacity could remain unused”.
In a recent article published by Reuters, Michael Lewis, CEO of Uniper, a state-owned German energy company commented: “There would be no turning back on Europe’s reliance on Russian pipeline gas. We had a single point of failure, and the key to addressing that single point of failure was LNG, which showed how quickly we could move away from pipeline gas and revealed enormous flexibility in the LNG supply chain”.
However, Lewis said a flexible duration such as short-term LNG contracts is needed to support Europe’s energy sector.
“Shorter-duration contracts for LNG purchases will be important for Europe’s diversifying supply following the uncertainty about long-term gas demand,” he explained.
He stated that some LNG developers prefer 20- to 25-year LNG contracts which would help them secure financing for multi-billion-dollar LNG projects.
“But, European nations are committed to moving to renewable fuels within the next 20 years, and this scenario creates an imbalance in terms of demand and supply in the LNG market.
“LNG would play a significant role first in meeting Europe’s immediate emissions targets and need for energy security.
“The role of liquefied natural gas in Europe’s energy mix is reasonably secure until 2030, but after that, it is “very, very, challenging” to predict gas demand as countries ramp up decarbonization efforts.
“We want to continue to diversify geographically but also in terms of the duration of contracts. Uniper would continue to seek diversification and flexibility in supplies. The key challenge will be getting the right pricing and the right flexibility so that you can move that gas around easily, as demand starts to fall in Europe,” he added.
Europe’s sudden demand for more LNG imports to replace lost Russian pipeline gas volumes contributed to the uncertainties and highly volatile LNG market. The energy crisis came at a high cost, both financial and environmental, reminding the world that energy shocks of such magnitude can jeopardize progress on climate and energy transition agenda, as the high cost of natural gas last year drove consumers to switch to oil and coal wherever possible.
The energy crisis also earned LNG a reputation as an alternative fuel source for European countries, while undermining the prospects for demand growth in key markets such as Asia Pacific. Despite Europe’s huge interest in LNG, prominent industry stakeholders have raised serious concerns that the continent’s demand for LNG isn’t sustainable, noting that it would only last for a short-term period due to its energy transition agenda which are centralized on renewable energies such as solar energy, wind energy, hydrogen, etc.
Global LNG Trade
According to IGU 2023 World LNG Report, global LNG trade grew by 6.8% reaching 401.5 million tons between 2021 and 2022. The increase was driven by a surge in LNG demand in Europe to offset dropping pipeline gas flows from Russia. The annual LNG supply growth in 2022 was almost 3% higher compared to 2021.
The United States and Russia witnessed the biggest growth in LNG exports in 2022. The US overtook Qatar as the world’s second-largest LNG producer last year, while Australia maintained its first place by exporting 80.9 MT in 2022 – an increase of 2.4%.
H.E. Rahm Emanuel, Ambassador of the United States of America to Japan said: “United States and other top LNG producers as well as consumers play a major role in setting a new standard for the world to follow.”
He made this known during his keynote speech at IEA’s 12th edition of the LNG Producer-Consumer Conference 2023 Ministerial Session
He said, “United States in its production of LNG can help stabilize the global market. Other countries do not need to go through Europe just like what we experienced last year as the US played a major role in Europe’s energy security.
“Not only that US LNG help stabilize the global market, but we can also ensure continued global growth and contribute to our collective climate objectives.
However, he added that there is a need for LNG-producing countries should collaborate in such a way that no country will be a victim of Russia’s exhortation with the use of energy.
“For the next chapter of the growth of LNG as a resource, we need to make LNG a contributor to our collective climate goals”.
Shell LNG Outlook 2023 also revealed that European countries, including the UK, imported over 121 million tonnes of LNG in 2022 compared to 2021 which stood at 75.1 million tons.
Europe imported over 66% more LNG in 2022, and LNG volumes from the US accounted for 44% of Europe’s total LNG imports. Most of the growth recorded in terms of LNG imports came from key European buyers such as France, the UK, Spain, the Netherlands, Belgium, and Italy. Although nearly all European markets grew in 2022, France, Spain, and the UK topped the list, according to the IGU report.
Commenting on the IGU 2023 World LNG Report, Li Yalan, President of the International Gas Union said, “Global LNG trade grew by an impressive 6.8% last year reaching a new record of 401.5 million tonnes (MT). As of April 2023, the global LNG trade network connected 20 exporting markets with 48 importing markets, including first-time LNG importers in Germany and the Philippines. 2022 also saw Mozambique join the LNG exporters club with the long-awaited startup of Coral South FLNG.
“Amid the crisis, many European markets imported LNG at maximum capacity to meet demand and replace lost Russian pipeline gas. France ran its LNG import terminals at full capacity for most of 2022, and Belgium’s terminals regularly exceeded capacity. Spiking LNG demand from Europe and a lack of growth in global LNG supplies resulted in soaring gas prices amidst a tight market. Since the conflict between Russia and Ukraine broke out, more than 10 European markets initiated remarkable new regasification terminal construction plans with 26 projects totaling 104.5 MTPA. Nearly 70% of the new capacity will come from floating terminals, which can be brought online faster and relocated when needed.
“LNG saved the day and supplied more than just fuel, it provided energy security and kept the lights on. We saw a demonstration of the undeniable value of LNG, as the optimal source of flexible, reliable, and efficient energy for the world.
“The prices eased in 2023, but the level of risk and uncertainty remains high; the market is still out of balance; and the crisis is not yet over. In this moment of respite, it is imperative that governments around the world better define their long-term energy security plans – both in the coming 2-3
years and after 2030 as the world will continue to demand more energy.”
European LNG imports witnessed a positive growth of 50.4 MT in 2022, while Germany also joined the ranks of LNG importers in the first quarter of 2023. Germany, the world’s fourth largest economy, in the space of a year, is emerging as a major LNG importer, having previously been absent from the market.
“Germany has made a tremendous effort in the cause of the 2022 energy and gas crisis to move away from its dependence on Russian natural gas,” said Dr. Philipp Nimmermann, Germany’s State Secretary for Energy in the Federal Ministry of Economic Affairs and Climate Action during his keynote speech at the
at the 12th edition of the LNG Producer-Consumer Conference 2023. “Germany has started the construction of temporary LNG infrastructure to be converted to green hydrogen use later in the future as well as reorganized its natural gas import flows from east to west and introduced several gas-saving measures”.
Nimmermann explained, “Germany has ramped up its crisis management and crisis preparedness efforts. We are fostering structural measures to significantly reduce the demand for natural gas.
“Our short-term measures regarding coal and LNG are necessary to deal with the energy crisis. This isn’t the renaissance of fossil fuels and we stay committed to facing out fossil fuels over time entirely. We believe this is the key consideration while considering the proposed energy strategy.
“As part of the European Union security of the gas regime, Germany stays committed to EU security of gas supplies and regulations. We have actively contributed to shaping the 2022 emergency gas regulations to mitigate the risks imposed by changing supply settings.
“To increase resilience in its energy supply in the long-term, Germany has stepped up its efforts to decarbonize and increase the speed of renewable energy production with the aim of reaching 80% renewable energy generation by 2030.
“We have a clear view of establishing a green hydrogen economy.
“Germany supports international efforts on reducing greenhouse gases (GHG) in particular methane emissions along the LNG supply chain. Furthermore, Germany supports EU efforts in setting up respective regulations for reducing methane emissions.
“Germany stays fully committed to the Paris Agreement and has set itself with the goal to achieve climate neutrality until the year 2045”.
Germany launched several LNG import terminals including floating terminals that were constructed, approved, and put into use in the ports of Wilhelmshaven, Brunsbuettel, and Lubmin in less than a year which helped Germany avoid a winter energy deficit.
The Wilhemshaven terminal is developed to receive approximately 80 tankers a year, which could substitute up to half of the gas imports that the German energy company Uniper formerly imported from Russia. This could supply approximately eight percent of German gas demand as of early 2023. The Lubmin FSRU, also known as the German Baltic Sea LNG Terminal and Deutsche Ostsee LNG Import Terminal, is a liquefied natural gas (LNG) import terminal operating in Germany.
In January 2023, TotalEnergies officially announced the start-up of the Lubmin FSRU terminal which has started receiving LNG early this year. This project, to which TotalEnergies is contributing a floating storage and regasification unit (FSRU) and supplying LNG, will make the Company one of Germany’s main LNG suppliers.
The Brunsbuttel LNG regasification terminal has a proposed regasification capacity of 282.4bcf/annum (billion cubic feet) and a storage capacity of 0.15 million tons (Mt) and is operated by a German LNG Terminal. German LNG Terminal GmbH aims to establish and operate Germany’s first multi-purpose LNG import and small-scale terminal on the country’s northwest coast. It will improve gas supply and infrastructure in Germany and thereby contribute to the achievement of the European Union.
“The onshore LNG terminal in Brunsbüttel will improve gas supply and infrastructure in Germany and contribute to the EU’s goals in terms of security and diversification of energy supplies,” Dr. Frank Laurich, Corporate Communications & Stakeholder Management at German LNG Terminal GmbH said.
“Although it has a peripheral location on the German “West Coast” it is a profoundly central European project: not primarily through the selection of the Dutch project partner Gasunie or the Spanish general contractor team Grupo Cobra & Sener. But in particular by creating modern energy supply opportunities for the central and eastern European neighbors at the same time,” Laurich explained.
Furthermore, Dr. Rob Arnoldus Adrianus Jetten, Netherlands Minister of Climate and Energy, disclosed that European countries imported about 55 billion cubic meters of LNG, while the Netherlands’ LNG import capacity increased from 12 to 24 billion cubic meters per year, which is an increase from their previous import before the crisis.
Jetten made this known during his opening speech from the Ministerial Session at IEA’s 12th edition of the LNG Producer-Consumer Conference 2023.
He said LNG made it possible for Europe to diversify its gas supplies and the US, Qatar, and other LNG suppliers made it possible for European countries to counteract the loss of Russian pipeline gas.
“LNG is now an important energy source for many countries. The Netherlands has worked intensively over the past year on several measures for sourcing alternatives to gas imports from Russia together with European and international allies. And this contributed largely in supplying new volumes of LNG to the Netherlands and the inland of Europe,” he said.
For LNG to work efficiently and effectively as a transition fuel, Jetten said there is a need for coordination for a proper balance of LNG demand and supply because it is an important factor in making liquefied natural gas economically viable given the large-scale investments that are involved.
“We need commitments from all parties involved to find a balance between the short, medium, and longer-term relations and contracts. LNG is a globally important transition fuel for the short and medium term.
“I support the initiative for the ‘Joint Gas Purchasing Mechanism’ as adopted by the European Union.
The European Union (EU) adopted the ‘Joint Gas Purchasing Mechanism’ to mitigate the risk of security of supply, lower gas prices, and volatility exacerbated by the Russia-Ukraine conflict. The Joint Gas Purchasing Mechanism would reduce the power of suppliers and increase competition between them by attracting new and additional supplies and offering sales opportunities through demand aggregation.
It also aims to ensure security of supply by purchasing natural gas, LNG, and hydrogen for the Member States jointly and at affordable prices, after aggregating their demand (at least 15% of the Member States’ storage filling obligations are subject to demand aggregation).
“This mechanism is open to participation from companies, and energy community contracting parties, while other economic regions could also follow this example.
“The goal is to reliably guarantee that required LNG volumes can be delivered at reasonable costs over the transition period,” he stated.
In addition, Jetten said that as much attention is given to LNG, more efforts are also required to rapidly increase the pace of the development of sustainable, clean energy production worldwide to become available for everyone.
“We support the ‘Global Early Warning between Major Consumers and Producers’ as proposed by IEA and the European Commission to timely signal disruption in major supply sources or sudden demand increase.
“All parties involved in LNG must start preparing, both existing and new LNG installations to support the transition to sustainable energy carriers like hydrogen, for example, to be ‘Hydrogen Ready’.
“The Netherlands calls upon all parties to strengthen and intensify work to prepare LNG infrastructure for the transition to renewable energy. To be truly ready when a demand for green energy carriers will materialize at the end of this decade.
“We should prepare ourselves for the best-suited technical solutions and operational processes for each installation, either existing or new to ensure this transition to renewable energy will succeed at the required pace.
“I, therefore, call upon all producing countries to jointly and urgently explore with all LNG consuming countries on options to produce at sufficiently large scale the required renewable energy carriers for the benefit of all energy users in this world and for these to become available by 2030 and beyond.
“I believe that if we work together closely, we can establish a successful LNG strategy for the world which would enable us to guarantee a stable energy supply for the short term as well as give us a head start for a successful transition to renewable energy for the benefit of all. I believe these are vital in laying the groundwork for an LNG strategy for the world,” he added.
The energy crisis didn’t just affect Europe, it impacted energy markets across the world as it also changed LNG import patterns during 2022.
According to the IGU 2023 World LNG Report, Asia saw a decrease of 19% in LNG demand as China and India both saw a sharp decrease in LNG imports. Asia Pacific imported a total of 160.9 MT in 2022, while Japan imported 73.6 MT, followed by China with 63.7 MT. Other countries such as South Korea, China stands as the largest LNG importers, while Thailand, Indonesia, Singapore and Malaysia, Bangladesh, Pakistan, Myanmar, remained the medium-sized LNG markets in 2022. This was due to high spot prices in the LNG market as Europe turned to liquefied natural gas (LNG) to replace Russian pipeline gas imports.
Despite Asia’s low turnout for LNG imports last year, Asia Pacific remains the largest net importing region with a 2.9% increase in demand, while Europe was the second-largest importing region with 126.6 MT of imports in 2022.
In terms of inter-regional LNG trade, the IGU report maintained that Asia Pacific dominated LNG trade flows accounting for about 97.9MT of LNG supplied within the region in 2022. There was also an increase in LNG exports moving from Australia to Japan which stood at 31.2 MT, South Korea (11.6 MT) and Chinese Taipei (7.6 MT), while from Malaysia to Japan (11.8 MT). While the remaining 37.8 MT of LNG was supplied from Asia Pacific to other Asian countries. Exports from Australia to China alone totaled 22.8MT in 2022.
Malaysia also retained its position as the fifth largest exporter of liquefied natural gas in 2022, after Australia, the United States, Qatar, and Russia.
IGU’s World LNG Report 2023 noted that LNG exports from Malaysia in 2022 stood at 27.3 million tonnes (MT), an increase from 24.9 MT in 2021, which constitutes about 7% of the total LNG traded globally.
The report highlighted that Asia Pacific remained the largest market for LNG, exporting a total of 136.6 MT in 2022 and importing 160.9 MT, where most of the LNG traded was intra-region at 97.9 MT.
Latin America saw a decrease in LNG demand by 40%, according to an IGU report. The drop was mainly driven by Brazil which saw imports dip to 2.2MT in 2022 from 7.8MT the previous year. This was mainly driven by Brazil which has been using less gas for power generation in the past 10 years due to favorable hydropower conditions. North America sent 14.2 MT to Asia Pacific (6.2 MT to South Korea and 4.4 MT to Japan) and only 1.9 MT to China.
“Argentina also imported less LNG in 2022, with volumes at 1.5MT compared to 2.5MT in 2021 due to higher domestic production. With its domestic gas production limited by infrastructure constraints, Argentina imports LNG as a complementary source of supply for power generation, while Chile also saw LNG imports drop from 1MT to 2.4MT in 2022.
“For other markets, imports rose in Jamaica (+0.5 MT), Panama (+0.2 MT), El Salvador (+0.2MT), and Colombia (+0.1 MT) to supply power generation facilities. North America recorded a 1 MT reduction in LNG imports to 2.1 MT in 2022, mainly driven by Puerto Rico (-0.7 MT). The Middle East saw imports rise 0.2 MT last year, with Kuwait increasing imports by 1.1 MT, but UAE reducing them by 0.8 MT,” IGU report revealed.
Türkiye was also among the top 10 largest LNG importers with 11.4 MT last year.
The third-largest trade flow was from the Middle East to Asia which stood at 40.6 MT (+6.7 MT over 2021), most of which was exported from Qatar (36.1 MT, +9.1 MT). Trade from the Middle East to Asia Pacific fell to 30.7 MT last year from 36.3 MT in 2021, the IGU report stated.
From the Middle East, Qatar also sent more than 70% of its LNG exports to Asia and 25% to Europe in 2022, according to Kpler tanker tracking data.
In 2023, China, India, South Korea, and Pakistan are the leading importers of Qatari LNG. Qatar’s LNG export reached a total of 48.35 million metric tons as Asia accounted for 36.27 MT, Europe 9.55 MT, South America 0.14 MT, and the Middle East 2.40 MT, according to S&P Global report.
Qatar’s government also plans to increase LNG export capacity and natural gas production through a major expansion in the North Field project development that is expected to be completed by 2028.
African LNG Export
Africa also prioritized Europe’s need for LNG export in 2022, exporting 28.6 MT to Europe, compared to 23.8 MT in 2021. While, African exports to Asia fell to 4.3 MT last year from 11.4 MT in 2021, mainly driven by a reduction in exports from Egypt (-3.1MT), Nigeria (-1.5 MT), and Angola (-1.4 MT).
Nigeria, Algeria, and Egypt will drive Africa’s Liquefied Natural Gas export in the short term.
In the African Energy Chamber (AEC) latest report – ‘The State of African Energy 2023’ – obtained by The Energy Republic, the report confirmed that the three countries would drive the continent’s LNG export volumes going forward. It maintained that the development, which would be enhanced by the existing and planned pipelines and other infrastructure, stands to impact Nigeria and other nations.
Specifically, the African Energy Chamber report, stated: “Africa is in a prime position to increase its natural gas output and benefit from an undersupplied LNG market and demand from Europe.
“Ramp up is expected through the second half of this decade as Mozambique ramps up its LNG output and new gas startups across the continent come online and take the output on an increasing trend.
“But an increased focus on LNG exports is apparent with an expected uptick in near-term LNG flows from the continent. Nigeria and Algeria are expected to drive the majority of these export volumes with additional flows coming from Egypt, Equatorial Guinea, Mozambique, and waters off Senegal – Mauritania.”
Commenting on the growth opportunities in the LNG industry, the Executive Chairman of the African Energy Chamber (AEC), NJ Ayuk, stated that LNG remains the cleanest fossil fuel, making it important in this phase of the energy transition.
He said: “Driven by growth in power generation and industrial demand, especially in developing countries that need more energy rather than less, the market for LNG is expected to rise by as much as 50% by 2030. That translates to tens of thousands of jobs at every LNG facility, along with an increase in the economic activities that follow job creation. Being considered a “transitional fuel” is just one of the things LNG has going for it.
“Equally important, LNG is easy to transport long distances from producing basins to markets around the world. With the United States, China, Europe, and much of Asia counting on LNG volumes sourced from Africa as part of their efforts to reduce greenhouse gases, having long-range access is a significant advantage.
“In addition, in areas where there is existing natural gas pipeline infrastructure, such as from northern Africa to Europe, and established export relationships, African LNG is regarded as a ready alternative, especially given the ban on Russian imports. Those exports are bound to improve national, regional, and local economic productivity – and, ultimately, to lift entire families out of poverty.”
He added: “All told, those four sub-Saharan nations – Nigeria, Equatorial Guinea, Angola, and Cameroon – have as much as 33.8 mtpa of LNG export capacity. Add the potential of existing and planned projects in Mozambique, Tanzania, Ghana, and Mauritania-Senegal, and regional capacity could reach 134 mtpa by 2030 if market conditions allow. The continent is forecast to increase its gas output from about 260 bcm in 2022 to as much as 335 bcm by 2029.”
In summary, the LNG demand growth in 2022 was mainly driven by Europe and Asia Pacific, while other market such as Latin America among others contributed their quotas to boost LNG growth. Overall, the global LNG trade reached a new record of 401.5MT in 2022, up by 6.8 percent as against 4.5 percent in 2021, connecting 20 exporting markets with 462 importing markets. The 25.4 MT increase was driven by a surge in LNG demand in Europe to offset dropping pipeline flows from Russia.
The LNG shipping market
As of the second quarter of April 2023, the global LNG fleet stood at 668 active vessels, including 45 FSRUs and eight floating storage units (FSUs). The global fleet grew by 4% with the delivery of 27 carriers in 2022. Most vessels delivered last year were in the 170,000 to 180,000 cubic meters (cm) size range, according to the IGU 2023 World LNG Report.
In addition, there are also some growth prospects in terms of the global LNG bunkering activities in 2023 compared to 2022 where there was a decline as oil-based fuels traded at significant discounts due to global LNG prices.
On this note, IGU forecasted that 2023 is widely expected to be a revival year for the LNG bunkering market. As the global shipping fleet turns to LNG to decarbonize and adhere to stricter environmental regulations.
“As of end-April 2023, the global operational LNG bunkering and bunkering-capable small-scale vessel fleet has reached 35 units, including both self-propelled and tug-propelled vessels and barges.
“There are an additional 14 vessels on the order book, to be delivered across the globe. The typical size of these vessels is increasing over time with the average capacity of the active fleet rising to 7,700 cm by end-2022, up from 6,900 cm in 2021. The order book averages 9,800 cm,” according to the IGU report.
As shipowners are rushing to reduce their emissions, LNG remains by far the most popular of the lower-carbon fuel choices. Momentum continues to build behind LNG-fuelled shipping carriers (vessels). Norwegian Classification Society DNV report disclosed that among the new vessels able to run on alternative fuels that were ordered last year, 222, or 81%, are LNG-fuelled.
Ships capable of LNG propulsion still represent only a fraction of the global shipping fleet by tonnage – 4.6% according to London-based shipping services firm Clarksons. But momentum is building, with LNG-capable vessels accounting for 17.8% of the ships currently on order, or 39.5% in terms of gross tonnage. Bunkering infrastructure has also been expanded – there were 185 ports able to bunker vessels with LNG as of January 2023, up from 141 a year earlier, according to Clarksons. And a further 50 ports are expected to join them by 2025.
DNV forecasts that the number of LNG-capable ships will reach 876 by the end of this decade – but the LNG bunkering industry is more bullish on growth prospects. Based on the current growth trajectory, the industry association SEA-LNG projects that the number will reach 2,000 – 4,000 vessels in operation by 2030.
Amidst the ongoing fluctuations in the global energy market, liquefied natural gas would remain a strong prospect and will continue to play a pivotal role in bringing the much-needed clean energy supply across the world. LNG provides energy security and supports transition, as it replaces coal and oil, accelerates the integration of renewables, and paves the way for its decarbonization. Decarbonizing the liquefaction segment of the LNG value chain offers a significant opportunity to minimize lifecycle emissions today, and this has been a positive trend across several projects.
The Russia-Ukraine war has also stimulated more interest in developing more LNG projects such as Liquefaction Facilities, Regasification Terminals, and Floating Liquefaction Capacity, as markets seek to re-establish energy security priorities while balancing decarbonization goals.
According to Rystad Energy’s report, “Investments in new liquefied natural gas (LNG) infrastructure will reach $42 billion annually in 2024. This is an increase from last year’s investment which stood at around $27 billion. Investments sanctioned in 2023 are nearing $32 billion, before peaking at $42 billion in 2024.
“In addition, these Greenfield investments are 20 times the amount in 2020 when just $2 billion was invested in LNG developments due to the pandemic”.
Rystad Energy report also stated that the new LNG projects are driven mainly by a short-term increase in natural gas demand in Europe and Asia, noting that project approvals after 2024 are forecast to fall off a cliff as the government transitions away from fossil fuels and accelerate investments in low-carbon energy infrastructure.
“Investments sanctioned in 2023 will show a modest increase, nearing $32 billion, before peaking at $42 billion in 2024,” the research firm said.
“After this date, investments will decline and drop back near 2020 levels to reach $2.3 billion in 2029.”
In addition, despite an expected jump in 2030 when project announcements are forecast to total nearly $20 billion, investment in greenfield LNG is unlikely to ever return to 2024 levels as countries scale up investments in low-carbon technologies.
“The $10 billion Golden Pass LNG project in Texas, a joint venture between Qatar Energy (70 percent) and ExxonMobil (30 percent), is expected to start production by 2024,” Rystad Energy estimates.
“Adding export capabilities to the Sabine Pass LNG terminal totaling around 18 Mtpa.”
In addition, Venture Global’s Plaquemines LNG in Louisiana – a $13.2 billion development sanctioned earlier this year – is expected to produce about 24 Mtpa and start up in 2025.
“In a move that may become more common in the crowded market, Cheniere Energy signed a deal with Chinese state giant Petro China to supply around 1.8 Mtpa of LNG from its Corpus Christi LNG facility, with deliveries from 2026 to 2050.
“Elsewhere, Qatar, Mozambique, and Russia are playing catch up,” Rystad Energy said.
Furthermore, Qatar, already a major producer, aims to boost LNG export capacity to 126 Mtpa by 2027 from a current 77 Mtpa.
However, ExxonMobil, Shell, TotalEnergies, Eni, and ConocoPhillips have been chosen to join state-owned Qatar Energy in the North Field East expansion project, which is set to raise capacity to 110 Mtpa.
“Russian volumes are primarily dependent on the successful completion of the Novatek-operated Arctic LNG 2 project,” Rystad Energy.
“Which is potentially in jeopardy as sanctions against Russia over the Ukraine conflict have led to delays in the commissioning of Train 2 and Train 3.”
Furthermore, project partners TotalEnergies and JOGMEC have halted all financing related to the scheme in the Russia-Ukraine war, followed by the withdrawal of chemicals giant Linde as a contractor.
“Projects that have been approved or are currently being developed will recover about 300 Tcf of LNG, Rystad Energy estimates.”
“Led by the US with approximately 97 Tcf, then Qatar with about 52 Tcf and Russia at 50 Tcf.”
It said, “These top three nations hold around 70 percent of the total sanctioned, yet-to-be-produced global LNG resource.”
On the other hand, QatarEnergy plans to gradually increase the country’s export capacity to 19.7 billion cubic feet per day (Bcf/d) when the six new liquefaction trains linked to two new North Field LNG export terminal projects enter commercial service.
Qatar’s $30 billion North Field Expansion (NFE) project is on track and will be completed by 2027. The main contractors of Qatargas’ massive North Field Expansion (NFE) project Technip Energies and Chiyoda are progressing with construction activities and are expected to complete the project by 2027, according to data from DMS Projects.
In terms of global LNG liquefaction capacity, the International Gas Union (IGU) 2023 World LNG Report shows that global LNG liquefaction capacity is expected to almost double, potentially increasing from 487.3 million tonnes per annum (MTPA) in 2022 to 997.1 MTPA by 2027. This IGU projection is focused on projects that have received all necessary approvals or are in the pre-FID stage. While the average global utilization rate of these facilities reached 89% in 2022, compared to 80.4% in 2021. This was due to an increase in LNG imports in Europe to offset the significant drop in Russian pipeline gas volumes to Europe.
According to the IGU report, “22 markets were operating LNG export facilities as of April 2023. The US surpassed Australia to become the market with the largest operational liquefaction capacity at 88.1 MTPA, followed by Australia with a liquefaction capacity of 87.6 MTPA, and Qatar with 77.1 MTPA. The US increased its total operational capacity to 88.1 MTPA by April 2023, with the Calcasieu Pass liquefaction facility (10 MTPA) and Sabine Pass LNG T6 (5 MTPA). The top three LNG export markets currently represent more than half of global liquefaction capacity. While 178.3 MTPA of liquefaction capacity is either under construction or approved for development, of which approximately 44% is in North America as of April 2023”.
Moreover, there are still several liquefaction facilities that are under construction or have taken FID recently. Some of the projects include the Tangguh LNG (Indonesia), Plaquemines LNG (USA), Port Arthur LNG (USA), Cedar LNG (Canada), Kitimat LNG (Canada), Woodfibre LNG (Canada), Papua LNG (Papua New Guinea), Abadi LNG (Indonesia), Sakhalin-2 LNG (Russia) and others, which some of them are expected to become operational in 2023 and beyond.
“In Indonesia, Tangguh LNG T3 (3.8 MTPA) is being commissioned with start-up expected this year. Tangguh LNG’s capacity will be expanded to 11.4 MTPA along with its existing two operational trains (7.6 MTPA).
“In the US, Venture Global took FID on Phase 2 of the Plaquemines LNG project (10 MTPA) after securing project permits and financial support less than a year after sanctioning Phase 1 in March 2023.
“The same month, Sempra took FID on its Port Arthur LNG project in Texas which has a total capacity of 13.5 MTPA.
“Of the 997.1 MTPA of proposed liquefaction capacity in the pre-FID stage, the US accounts for 33.4% (333 MTPA), followed by Canada at 23% (229.6 MTPA) and Russia at 13.7% (137 MTPA).
“Out of the 229.6 MTPA of liquefaction capacity proposed in Canada, facilities on the western coast have the advantage of lower shipping costs to the Asian LNG market when competing with other planned projects on the US Gulf Coast. Due to strict environmental standards, those LNG export projects have adopted various strategies to reduce carbon emissions to comply with environmental regulations.
“Cedar LNG 1 (3.0 MTPA), Kitimat LNG (18.0 MTPA), and Woodfibre LNG (2.1 MTPA) are planned to be powered by clean and renewable hydropower. Similarly, LNG Canada T3-T4 (14.0 MTPA) has selected high-efficiency aero-derivative gas turbines to minimize fuel use and will also power a portion of the liquefaction plant with renewable energy.
“Another three proposed projects on Canada’s east coast will add 38.5 MTPA of liquefaction capacity by 2040: Bear Head LNG (12.0 MTPA), Saguenay LNG (11.0 MTPA) and AC LNG (15.5 MTPA).
Ms. Erin O’Brien, Canada’s Assistant Deputy Minister of Natural Resources said: “Canada is poised to contribute close to 45 MTPA of the lowest emitting and most inclusively produced LNG in the world by the end of this decade.
“Currently, there are approximately 8 active LNG projects in various stages of development on Canada’s west coast, including LNG Canada phase 1 which is over 85% complete and we will start exporting by 2025. LNG Canada’s current capacity is 14 MTPA which could double if phase 2 goes ahead. The ownership structure includes Shell, Petronas, Korea Gas, Mitsubishi, and Petro China, which underscores Canada’s future as a key supplier to Asia.
“LNG Canada will be the lowest GHG emitting facility globally which is supported by several actions Canada has taken to reduce the carbon intensity of our LNG.
“Canada’s LNG opportunity has been made possible partly due to increasing the cooperation and partnerships between industry and our first nations. It will continue to increase with other economic benefits.
“Notably, Canada is committed to reaching Net-Zero by 2050. We are also one of two countries producing LNG under a carbon pricing framework and we will continue to strengthen it.
“Canada is also one of the first countries to sign the ‘Global Methane Pledge’ to reduce methane by 30%. With our industry milestones, we are now strengthening our domestic regulations to reduce methane emissions by 75%.
“We will increase energy security while advancing our ambitious climate goals and indigenous reconciliation”.
O’Brien made this known during her speech at the 12th edition of the LNG Producer-Consumer Conference 2023.
In Asia Pacific, Australia still takes the lead with the largest planned capacity of 45.5 MTPA.
In another development, Inpex, the operator of the Ichthys project, is planning to boost its current capacity of 8.9 MTPA to 9.3 MTPA by 2024. Other proposed projects such as Abbot Point LNG T1-T4 (2.0 MTPA), Darwin LNG T2 (3.5 MTPA), Gorgon LNG T4 (5.2 MTPA), and Wheatstone LNG T3-T5 (15.9 MTPA) have yet to progress, with most still in the feasibility stage.
TotalEnergies has been progressing with the Papua LNG project (5.4 MTPA) in Papua New Guinea, which is expected to be approved in 2024 and start production in 2027.
“In Southeast Asia, Indonesia has proposed 17.33 MTPA of liquefaction capacity, mainly from Abadi LNG (15.0 MTPA), which will be supplied by the Abadi gas and condensate field in the Masela PSC. Despite the project being in development since 2006, it remains in the planning stage. It is expected to be approved in the second half of this decade but is unlikely to come online before 2035.
“Russia currently has 137 MTPA of proposed liquefaction capacity, in addition to the Arctic LNG 2 (19.8 MTPA), which was approved in 2019. In Eastern Russia, Far East LNG, often referred to as Sakhalin-1 LNG (6.2 MTPA) is a major project in the pre-FID stage that is aiming to commercialize produced gas from the Sakhalin-1 gas fields.
“Sakhalin-2 LNG T3 (5.4 MTPA), another project in the pre-FID stage, may face difficulties with sourcing feed gas since it plans to purchase this from the abandoned Sakhalin-1 gas fields with developed gas reserves in the Sakhalin-2 region not yet sufficient.
“After commissioning Yamal LNG (17.4 MTPA) and taking FID on Arctic LNG 2 (19.8 MTPA), Novatek aims to boost LNG production in the Arctic region via the proposed Arctic LNG 1 (19.8 MTPA), Arctic LNG 3 (12.2 MTPA) and Obskiy LNG (5.0 MTPA) projects.
“Yakutsk LNG (17.7 MTPA) situated in Russia’s Far East is estimated to start exports to Asian and Asia Pacific markets from 2031. This project involves a gas pipeline from Yakutia to the Sea of Okhotsk, and a condensate pipeline with a capacity of 1.5 MTPA. Several international players such as ExxonMobil and TotalEnergies have exited or withdrawn their investments in Russia since the start of the Russian-Ukraine conflict. This, combined with a series of sanction packages towards Russia in technology export controls, could lead to planned liquefaction projects facing challenges when substituting foreign technologies such as turbines with local alternatives. Nevertheless, Russia still has major export potential in the long run for its huge resource base,” according to IGU 2023 World LNG Report
Following the recent natural gas discoveries in Africa, Egypt, Algeria, and Nigeria as well as to a lesser extent Equatorial Guinea and Angola will continue to hold the majority of the market share for LNG on the continent.
Algeria and Egypt may maintain their current LNG infrastructure capacities of roughly 29 million tonnes annually and 12.7 million tonnes annually respectively.
Meanwhile, Nigeria’s ongoing Train 7 project will boost Africa’s LNG capacity. NLNG Train 7 will also increase Nigeria’s LNG infrastructure capacity from 22 million tonnes per annum (MMtpa) to 30 MMtpa when it comes on stream. Train 7, which was almost 32% completed in 2022, is designed to meet local demand while boosting LNG exports from Nigeria as well as diversifying Nigeria’s revenue stream, and assisting the country in making better use of its over 200 tcf of natural gas reserves. Nigeria is also planning for Train 8 which will be different from the existing ones, with a focus on reducing carbon emissions.
On this note, Algeria, Egypt, and Nigeria will continue to account for the majority of the LNG coming out of Africa for the next few years. Africa is now on track to see its total LNG export capacity rise from the current level of 80 million tonnes per year to around 110 million tons per year by 2030 and to more than 175 million tonnes per year by 2040.
Other pipelines of proposed projects in Africa include Mozambique’s Rovuma LNG (15.2 MTPA) project which has yet to reach an FID; Brass LNG (10.0 MTPA) in Nigeria was proposed in 2003 and has been subject to numerous attempts to reach FID amid ownership changes and project alterations. Earlier in 2022, the Nigerian government announced plans to revive the project in the Niger Delta, citing increasing demand for gas as a transitional fuel; Mauritania Phase 2 of the Greater Tortue Ahmeyim (GTA) project to add another 2.5 MTPA, operated by BP and partners.
Timely execution of these proposed projects will be critical for Africa’s LNG sector as competing markets such as Australia, Qatar, and the US look to ramp up LNG exports to meet global demand.
In summary, the IGU report highlighted that there are currently about 997.1 MTPA of aspirational liquefaction capacity which are still under the pre-FID stage. The most proposed capacity is in North America (611.4 MTPA), with 333 MTPA situated in the US, 229.6 MTPA in Canada, and 48.8 MTPA in Mexico. This is followed by Africa (101.9 MTPA), Russia (137 MTPA), Asia Pacific (68.9 MTPA), and the Middle East (71.5 MTPA). About 6.4 MTPA of liquefaction capacity is proposed in the rest of the world.
Overall, the market upheaval caused by the Russia-Ukraine conflict has created the conditions to stimulate investment in additional liquefaction facilities as there is a need to find an appropriate balance between energy security and decarbonization goals in this evolving energy landscape.
“Aside from the above, there are currently 312 LNG carriers under construction as of April 2023. Of the 312 vessels, 28 are scheduled for delivery later in 2023, 81 in 2024, 88 in 2025, 85 in 2026, 29 in 2027, and one in 2028.
“The past year has been a record year in terms of orders with South Korean and Chinese shipbuilders expected to continue accommodating orders. These are being driven by large projects under discussion, such as with Qatar Energy, and the ongoing wave of development in US LNG for which shipping is critical to maximizing flexibility,” the IGU report noted.
If all projects materialize, global liquefaction capacity will increase three-fold.
Regasification Terminals: Global regasification capacity reached 970.6 MTPA across 48 markets as of the second quarter of April 2023, according to IGU 2023 World LNG Report. More than 80% of regasification capacity additions last year came from new terminals. In 2022, the highest capacity additions were in Europe, which saw an additional 14.5 MTPA of regasification, followed by Asia Pacific with 8.5 MTPA of new regasification, Asia with 6 MTPA, and Latin America with 2.2 MTPA. Global Regasification capacity grew by 3% in 2022.
As of April 2023, 219.3 MTPA of new regasification capacity was under construction. Five new markets including Vietnam, Estonia, Senegal, Ghana, and Nicaragua are currently building their first LNG import terminals and planning to start importing LNG in 2023.
Offshore and floating regasification capacity reached 177.2 MTPA across 44 terminals as of April 2023.
LNG is becoming an increasingly important pillar of energy security, supported by the rapid development of old and new regasification terminals across the world.
In terms of the existing terminals, there are about 10 largest LNG regasification terminals in the world by capacity, according to GlobalData’s LNG regasification database. The existing LNG regasification terminals include:
More than 10 European countries, including Germany, the Netherlands, Finland, France, Croatia, and Italy, have initiated the construction of new capacity since the Russia-Ukraine war started. This includes 26 projects with a combined regasification capacity of 104.5 MTPA. Of these, six have been commissioned, adding 25.5 MTPA to global capacity as of April 2023.
Floating and offshore regasification capacity: Floating terminals have become popular in Europe owing to redeployment abilities. There has been a notable trend in Europe towards floating regasification terminals given their ability for redeployment and speed to market compared to onshore terminals.
“As of the end of April 2023, IGU report shows that there were 44 floating and offshore terminals worldwide with a total import capacity of 177.2 MTPA, accounting for around 18% of global regasification capacity. These terminals are located in various regions, including Asia, Europe, the Middle East, and the Americas.
“In addition, 16 floating and offshore terminals are under construction, with a total regasification capacity of 58.3 MTPA, the majority of which are scheduled for completion this year. According to the IGU report, there are another 12 floating terminals with a combined capacity of 40.2 MTPA, which are under construction and may commence operation in 2023 if everything goes as planned.
“As of April 2023, five new floating-based terminals have been commissioned so far this year, including Lubmin FSRU and Elbehafen FSRU in Germany, Inkoo FSRU in Finland, Batangas Bay floating storage unit (FSU) with onshore regasification in the Philippines, and Gulf of Saros FSRU in Turkey with a combined regasification capacity of 21.8 MTPA.
“Five new markets – Vietnam, Estonia, Senegal, Ghana, and Nicaragua – are expected to emerge this year if floating terminal projects progress as planned. In the past two years, four new markets started importing LNG following the commissioning of FSRU-based terminals, including Croatia, El Salvador, and Germany, and most recently as of April 2023, the Philippines.
Floating Liquefaction Capacity (FLNG)
As of April 2023, there are currently five operational FLNG units globally and 134.6 MTPA of aspirational liquefaction capacity proposed as FLNG developments. For the operational FLNGs, 96.4 MTPA is in North America, while Coral South FLNG (3.4 MTPA) in Mozambique is the latest addition to the global FLNG fleet, with the first LNG cargo departing Coral South FLNG in November 2022.
The IGU 2023 World LNG Report, stated that Altamira FLNG and Tangguh LNG are the two liquefaction projects that are expected to become operational in 2023.
“Altamira FLNG (2.8 MTPA) is currently on schedule to become operational in the third quarter of 2023. About 80% of construction work on the first two FLNG liquefiers has been completed, with construction permits for offshore work in the Altamira area in place and awaiting the arrival of the FLNG unit.
“Tangguh LNG T3 (3.8 MTPA) is in the commissioning phase with the facility aiming to deliver its first cargo by June 2023.
“In addition to Altamira FLNG, there is another FLNG unit (2.4 MTPA) currently under construction by Wison Heavy Industry for Eni’s exploration in Congo.
“In February 2023, BP and partners confirmed the development concept for the second phase of the BP-operated Greater Tortue Ahmeyim (GTA) LNG project, agreeing to take it forward to the next evaluation stage. The GTA LNG project, also known as Golar Gimi FLNG, initially received FID in 2018 and was estimated to supply up to 10 MTPA of LNG via subsequent project phases.
“GTA phase 1 experienced delays due to the COVID-19 pandemic, leading the operator to declare force majeure. First gas is now expected in the third quarter of 2023 with the first LNG production by end-2023.
“Tango FLNG, which was built in 2017 with a nameplate capacity of 0.6 MTPA. After the outbreak of the pandemic in 2020, Tango FLNG remained idle until August 2022 when Eni announced it had reached an agreement with Exmar to acquire Export LNG Ltd, which owns Tango FLNG. Once the mooring and construction work to connect with the Marine XII network and infrastructure has been completed, Tango FLNG is expected to start production in Congo in the second half of
- “Meanwhile, Eni has signed a contract with China’s Wison Heavy Industry for the construction and installation of an FLNG unit with a capacity of 2.4 MTPA. This will be the second FLNG to be deployed in Congo together with Tango FLNG. With the second FLNG project, the overall LNG production capacity of Marine XII is expected to reach 3 MTPA in 2025.
“In the US, the Delfin FLNG project completed front-end engineering and design (FEED) in October 2020, after being delayed because it was unable to secure long-term LNG contracts during the pandemic. In 2017, the US FERC authorized Delfin to put its project into service by September 2019. Since then, FERC has granted several one-year extensions to complete the project. Delfin LNG was granted another year-long extension in July 2022, giving it until September 2023 to put the onshore part of the proposed Gulf of Mexico FLNG project into service.
“Delfin LNG was planning to take FID on its FLNG project in 2022, but this is still pending. The remaining FLNG projects in the US – such as Point Comfort FLNG, Main Pass Energy Hub FLNG, and Cambridge Energy FLNG – have been progressing.
The United States LNG industry has grown to become one of the world’s largest. At least 16 new LNG projects are planned on the US Gulf Coast, with these projects either under construction or in the pre-final investment decision (FID) stage potentially adding between 70 million and 190 million tonnes/year of LNG capacity by 2030, WoodMac said.
FIDs have been taken on four new projects, including Golden Pass LNG, Plaquemines LNG Phase 1, Corpus Christi Stage 3, and New Fortress Energy’s Louisiana Fast LNG. The projects collectively will add almost 45 million tonnes/year of new US capacity. WoodMac classified the Plaquemines LNG Phase 2 and Port Arthur LNG projects as probable developments that would, when operational, add more than 19 million tonnes/year in capacity.
WoodMac sees another wave of new FIDs on the horizon, which would increase capacity even further.
“Our analysis indicates that, if current momentum continues, between 70 million and 190 million tonnes/year could be added to US LNG capacity before the end of the decade,” WoodMac said. “That would more than double current exports. If approved, we calculate these FIDs could lead to an investment of over $100 billion in US LNG production over the next 5 years.”
In Africa, there has been rising interest in FLNGs in recent years. Nigeria and other African countries are projected for a boom in floating liquified natural gas (FLNG) as the market is set for new capacity.
The development, according to a new report by Wood Mackenzie would specifically enable Nigeria to monetize its stranded offshore gas resources.
Nigeria has about 209 trillion standard cubic feet of associated gas that has not been harnessed due to infrastructure challenges and operating environment.
Wood Mackenzie believes that the floating LNG would provide a leeway for Nigeria to edge the security concerns.
In July this year, Nigerian National Petroleum Company (NNPC) Limited signed a deal with UTM Offshore for the construction of what is claimed to be the country’s first indigenous floating LNG (FLNG) project.
The UTM FLNG project is expected to produce 176 million cubic feet of gas per day from the Yoho Field located in oil mining lease (OML) 104, offshore Nigeria.
The ‘Global FLNG Overview 2023’ of Wood Mackenzie stated that 8.5 million tonnes per annum (mmtpa) of FLNG capacity was sanctioned in 2022 making it clear that after several years in the project doldrums, investor interest in floating is back.
Senior Gas Research Analyst at Wood Mackenzie, Fraser Carson said: “There are 12.5 mmtpa of FLNG projects currently under construction and by 2026, almost 25 mmtpa of floating supply will be operational. With international oil companies (IOCs), upstream producers, and midstream specialists all moving projects towards final investment decisions that could push capacity even higher by 2030.”
Carson noted that after a stuttering start, FLNG is proving to be a reliable commercialization option, adding that the utilization of FLNG facilities in Cameroon and Malaysia has been strong over the last year, with the units producing at close to or above 100 percent of available capacity.”
The report cites Africa as the center of the current boom in FLNG projects as several resource-rich countries look for solutions that would allow them the option of exporting any gas not utilized on their respective domestic markets.
“FLNG is removed from these above-ground risks such as armed insurgency and infrastructure sabotage. It offers producers a flexible solution to existing challenges,” Carson said.
Global LNG Outlook
As Europe moves away from Russian gas and Asia reduces its dependency on coal, demand and investment in liquefied natural gas will continue to increase.
Based on our findings, the global energy crisis experienced last year has begun to reduce starting from 2023 as the European gas storages are filled up to some extent coupled with forecasts for gradual recovery from key Asian LNG markets (China, Japan, India) in terms of LNG demand, as well as a reduction in gas and LNG spot prices.
A report published by BloombergNEF stated that competition between Northwest Europe and North Asia for liquefied natural gas is set to be less this upcoming winter (which runs from October to March), noting that 2023-2024 are likely to be slightly lower than last year due to limited cargo arrivals during the winter period.
However, BloombergNEF forecasted that Northwest Europe’s LNG imports could grow summer-on-summer due to higher storage injection needs.
“Supply growth in summer 2024 is projected to grow by 4% year-on-year and will be dominated by Russia due to the ramp-up of the Arctic LNG 2 project.
During her keynote address at the IEA’s 12th LNG Producer and Consumer Conference 2023, Ms. Ditte Juul Jørgensen Director-General, Directorate-General for Energy for European Commission said the European Union and its member states have introduced a series of measures on the demand and supply side as well as security of supply.
According to her, “EU enacted a mandatory storage filling and we achieved more than 95% storage filling ahead of the winter.
“We also established for the first time in history, a Joint Demand Aggregation and Joint Purchasing Mechanism at European Level known as ‘Aggregate EU’.
“The United States is our first supplier and plays a key role in balancing our energy system”.
She added that the European Union is seeking more cooperation between LNG-producing and consuming countries as the world transitions to a low-carbon future.
More so, Global LNG demand in the summer of 2024 is set to grow 2% year-on-year, with emerging markets in Southeast Asia and South Asia as the main drivers of growth, according to BloombergNEF report.
“Global LNG supply is expected to rise by 6% winter-on-winter, to 220 million metric tons.
“New projects in West Africa and Mexico will also see rising output as they start operations in winter 2023-24.
“Global LNG demand in winter 2024-25 is set to be 3% higher than in the previous year. Higher stockpiling needs in Japan and South Korea, continued growth in emerging Asia, and more imports to Europe will drive the momentum.
“LNG supply in winter 2024-25 is forecast to grow 2% versus estimates for the coming winter. The ramp-up of Plaquemines Phase 1 and Golden Pass will propel the US to the lead position in supply growth. Russia will follow as Arctic LNG 2 raise its winter-on-winter production,” BloombergNEF report revealed.
In addition, Australia’s LNG export is forecasted to remain stable and will also increase owing to higher production at QCLNG and Prelude LNG facilities.
Despite the imbalance in global LNG demand and supply, LNG will continue to remain relevant as the demand for Liquefied Natural Gas globally is expected to grow by 70% (percent) over the next 25 years, reaching 700 million metric tonnes per annum (MMTpa) by 2050, according to Wood Mackenzie report.
The growth elements are coming from several LNG projects development, such as Arctic LNG 2 in Russia, Altamira Fast LNG in Mexico, Tangguh Train 3 in Indonesia, the Tortue floating LNG project offshore Mauritania and Senegal, Tango FLNG in the Republic of Congo, among others.
Beyond the LNG projects development, the acceleration of the energy transition agenda positions the LNG industry in the spotlight.
Wood Mackenzie’s Accelerated Energy Transition (AET-1.5) report, stated that the global energy market will still need 160 million mmtpa of new LNG supply to be developed by 2040, but beyond this time, developers face the risk of declining prices and underutilization as demand reduces to 500 mmtpa by 2050 under Wood Mackenzie’s AET-1.5 scenario.
Americas LNG Outlook
In another report published by BloombergNEF, it stated that US LNG exports are set to recover with the Freeport LNG project being online.
“US exports are set to climb 17% during the winter, driven by Freeport’s return, as well as higher utilization of Calcasieu Pass. Most US projects will see higher output this winter.
EIA also forecasted that there would be some growth opportunities in global LNG export capacity in the next two years which will increase demand for flexible LNG supplies, mainly from the United States, to meet incremental growth in global demand.
“We expect U.S. LNG exports to average 12.0 billion cubic feet per day (Bcf/d) in 2023, positioning the United States among Qatar and Australia as one of the top three LNG-exporting countries in the world.
“We forecast that U.S. LNG exports will continue to grow in 2024, as two new LNG liquefaction projects come online: Golden Pass in Texas and Plaquemines in Louisiana.
“In our Short-Term Energy Outlook, we assume that U.S. LNG exports will continue to replace pipeline natural gas that had previously been exported from Russia to Europe.
“We expect U.S. LNG exports to average 12.0 billion cubic feet per day (Bcf/d) in 2023. In 2024, with the two new LNG export projects, we expect LNG exports to increase to 13.3 Bcf/d,” the EIA report stated.
Middle East LNG Outlook
Qatar’s LNG exports are expected to increase significantly, as a result of the North Field East project, anticipated to be completed by 2027. This project has a nameplate capacity of 33 million tonnes.
H.E Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs and President and CEO of Qatar Petroleum said the country will increase its LNG production capacity to 126 million tons per annum (mtpa) by 2027, marking a 64% increase from the current 77 mtpa.
“New studies have revealed that the North Field’s productive layers extend well into Qatari land in Ras Laffan, paving the way for a new LNG production project in the north of Qatar,” Al-Kaabi explained.
Al-Kaabi also announced the confirmed gas reserves of the North Field exceed 1,760 trillion cubic feet, in addition to more than 70 billion barrels of condensates, and massive quantities of LPG, ethane, and helium.
He explained that as a result of these findings, the country’s gas industry would see a great positive impact in moving the industry forward into bigger and wider horizons. In particular, he said the results would enable the company to start the necessary engineering work for two additional LNG mega trains with a combined annual capacity of 16 million tons per annum.
Asia LNG Outlook
However, Asia’s LNG demand is forecasted to resume on an upward trajectory post-2023 following the region’s investment in regasification capacity, transmission, and distribution infrastructure coupled with new countries that are entering the LNG market from the region.
In East Asia, the BloombergNEF report shows that China is set to lead LNG demand growth with a 12% year-on-year increase to meet expanding gas demand as the country’s regasification capacity is expanding rapidly.
According to a BloombergNEF report, “Southeast Asia’s LNG imports are set to climb to the tune of 38% winter-on-winter. The demand growth will be driven by Thailand’s falling domestic gas production, boosting its need for LNG. Singapore’s LNG deliveries under new contracts, as well as Indonesia’s domestic shipments from the upcoming Tangguh Train 3 projects, will also lift demand.
“South Asia is also projected to contribute to the LNG demand growth winter-on-winter. India’s LNG demand will be buoyed by the recovery in lost contract volumes, while both India and Bangladesh will likely see higher spot purchases due to lower prices.
“Singapore is set to see additional contract deliveries, while Indonesia will get more domestic shipments from the new Tangguh Train 3 project, and the Philippines and Vietnam will take a few more cargoes than in summer 2023.
“India will ramp up imports at the Dhamra terminal, and Pakistan may purchase a few spot cargoes up from zero this summer.”
African LNG Outlook
Nigeria, Algeria, and Egypt are set to dominate the African natural gas market as the use of fossil fuels steadily becomes unpopular globally. Projections from the African Energy Chamber Report show that there is a steady growth in African natural gas supplies. These supplies are anticipated to increase to 41.6 Bcf/d by 2035 from a projected 25.5 billion Bcf/d in 2023.
From 2023 to 2027, Nigeria, Algeria, and Egypt are anticipated to control the African natural gas and liquefied natural gas (LNG) supply market, as the use of fossil fuel becomes unpopular globally. Data from the African Energy Chamber’s August 2023 State of African Energy report support this. The analysis estimates that Africa’s natural gas supply will be at 25.5 billion cubic feet per day (Bcf/d) in 2023, an increase of 1% from 2022.
Meanwhile, long-term supply potential is predicted to increase by 7% to 27.4 Bcf/d by 2025, by close to 30% to 32.8 Bcf/d, and by almost 65% to 41.6 Bcf/d by 2035, over the 2023 levels, in line with worldwide potential.
Long-term commercial flows from Africa are also predicted to remain relatively stable around 27-28 Bcf/d for the duration of this decade and the next before beginning to fall.
The report reads in part, “Algeria, Egypt, and Nigeria are expected to drive the majority of the natural gas supply with an average of 80% of the total African gas coming from these three countries. Individually, the short-term output of these three countries is estimated to stay relatively flat.”
“Algeria is expected to see a growth from 10 Bcf/d in 2023 to 11 Bcf/d by 2027; Egypt is expected to stay flat at 6.25 Bcf/d and Nigeria is expected to fluctuate marginally between 4.5 Bcf/d and 5.5 Bcf/d.”
The report also mentions other African countries that can become major players in the natural gas market, albeit, these countries possess very minimal potential for short-term results. The report states, “the mega natural gas projects offshore Senegal – Mauritania, Mozambique, Tanzania, and Ethiopia are expected to come online much later, and hence, have no impact on the short-term natural gas supply from Africa.”
“Angola, Equatorial Guinea, Mozambique, Mauritania, Cameroon, and Congo continue to flow LNG exports through the period with their Soyo LNG plant, Bioko LNG plant, Coral FLNG, Greater Tortue Ahmeyim (GTA) FLNG, Golar FLNG, and Marine XII FLNG, respectively. While Nigeria and Algeria LNG projects are operated by their respective national oil companies (NOCs) – NNPC and Sonatrach respectively,” the report adds.
Future potential and, more crucially, growth, are mostly driven by huge projects being run in nations like Mozambique, Tanzania, South Africa, and Mauritania-Senegal. The upstream fields that supply feed gas to the Soyo LNG facility are run or have majors as working interest partners in Angola as well.
The AEC study also emphasized that Africa has promised to put more effort into monetizing natural gas discoveries, assuring effective use of gas as a transition fuel and reducing emissions from widespread gas flaring.
Speaking on this development, Dr. Philip Mshelbila, MD/CEO, NLNG said Natural gas will play a significant role in Africa’s energy mix to meet the demands arising from rapid population growth and economic expansion, as well as the need for affordable access to clean energy and supply security for industrialization.
Dr. Mshelbila made these remarks during a strategic session at the recently concluded 2023 Gastech Exhibition and Conference in Singapore, where he discussed Africa’s role in increasing supply resilience in the energy transition context.
He stated that African gas could enhance global energy security by increasing gas production, ensuring a steady supply source despite rising domestic consumption, and the growth of floating LNG, facilitating the rapid delivery of gas products to the market.
He stressed the necessity of adopting a multi-dimensional approach to the energy transition, considering Africa’s specific context and evolving needs. Dr. Mshelbila pointed out that the continent is already capitalizing on opportunities in the energy transition, utilizing gas as an evolutionary energy source that offers a cleaner alternative to traditional biomass and coal.
He highlighted that transitioning from polluting sources to liquefied petroleum gas (LPG) and compressed natural gas (CNG) can reduce emissions by up to 48%. He cited Nigeria as an example, where the government actively promotes CNG usage in the transportation sector to expand gas utilization and drive progress across various industries.
Dr. Mshelbila also noted that Africa is maximizing opportunities in the growing LNG market, increasing its production capacity to substantially contribute to global supply. He added that Africa is emerging as a critical global gas supply source, with production expected to double, solidifying the continent’s role in global energy security.
On the private sector perspective for global LNG outlook, Lorenzo Simonelli, CEO of Baker Hughes said the outlook for LNG is positive, noting that there would be over 65 MTPA of final investment decisions (FIDs) for LNG projects in 2023 and beyond.
Speaking on these facts, Simonelli disclosed that Baker Hughes’s second-quarter earnings conference call on July 19 shows that the company secured long-term LNG contracts, which has been a key driver of the global LNG growth opportunities in terms of FIDs.
Starting from 2022, Baker Hughes secured LNG equipment orders worth $3.5 billion, booked $1.4 billion in LNG equipment orders in the first quarter and $900 million in the second quarter of this year.
Furthermore, during the second quarter, Baker Hughes secured an order for three main refrigerant compressors for NextDecade’s Rio Grande LNG project in Texas. This includes the recent FIDs for Phase 1 of Next Decade’s Rio Grande project and QatarEnergy’s North Field South project, he said.
“Based on the continued development of the LNG project pipeline, we still expect the market to exceed 65 MTPA of FIDs this year and should see a similar level of activity in 2024,” Simonelli said.
2026 and beyond
Sinomelli said that Baker Hughes continues to see the potential for this LNG cycle to extend for several years with a pipeline of new international opportunities expanding project visibility out to 2026 and beyond.
He said that Baker Hughes fully expects natural gas and LNG to play a key role in the energy transition as a baseload fuel to help balance against intermittent renewable energy sources.
Baker Hughes believes the expanding pipeline of LNG opportunities is tied to the growing recognition of this reality and that the transition will take more time and must be financially viable, the CEO said.
“As you look at 2024 and 2025, you’ve got several extensions on brownfield projects activities and coming out of the LNG 2023 meetings last week in Vancouver, a lot of dialogue on the continued need for LNG,” Simonelli told analysts during the call.
“And we stay very much with the view that we’re going to need more than 800 mtpa by 2030, he said.
“And given some of the environment and situation in the marketplace, we’re seeing that pull forward with these FIDs coming in sooner,” Simonelli said.
“So it’s a multiyear cycle where we see consistency in LNG FIDs. And you know the projects as well as I do. You’ve got opportunities from Cameron to Port Arthur to different elements of the Commonwealth. You’ve got Tellurian, you’ve got a number of projects out there that are imminently looking at FIDs as we go forward,” he said.
Adding to this, H.E Eng Suhail bin Mohammed Al Mazrouei, UAE Minister of Energy and Infrastructure said LNG plays a key role in meeting the world’s growing energy demand and will continue to do so as the world transitions to low carbon-energy sources.
To drive growth in the LNG industry, Mazrouei said, there is an urgent need to develop policies and regulations that promote an open and transparent LNG market to balance the supply and demand, including a fair competition and market base pricing mechanism.
He also noted that lack of investment is affecting both producers and consumers in terms of access to affordable, reliable energy and economic growth particularly in developing countries.
“As baseload, nuclear or natural gas can replace coal in power generation to achieve our environmental targets, but, the question is, do we have enough investments for gas and LNG to be able to carter for converting all of the coal power plants in the world to gas? The answer is NO.
“We need to promote long-term contracts and investment security to encourage continued investment in LNG infrastructure, including liquefaction plants, regasification terminals, and LNG bunkering facilities to support the growth of the global LNG market.
“Greater use of LNG in the past years through converting some of the coal power plants to gas have contributed to reducing the CO2 emissions significantly.
“Technology and innovation are major enablers for the safe and efficient production, transportation, and utilization of LNG. The adoption of best practices and advanced technologies is very important to further reduction of the environmental footprint of LNG production while meeting the growing demand.”
On the global front, according to him, UAE is strategically located between the major gas supply market and LNG demand centers in Asia and Europe, making the country well-positioned for LNG trade and supply.
“UAE’s relationship with Japan and Asian countries is very strategic and we have a commitment towards improving the security of supply to the region. We will continue investing and improving the relationship in the future.
“For over a decade, the United Arab Emirates has been Japan’s reliable supplier of oil and gas, providing around 25% of its crude oil requirements.
“As a responsible and reliable energy supplier, UAE is planning to increase its supply of LNG through a new LNG facility that ADNOC announced recently with a capacity of 4.8 million tons in addition to the volumes that we are currently exporting to the global market.
“Today, the two countries are expanding their partnership in energy and also include low-emission hydrocarbon, ammonia, renewable energy, and green hydrogen.
Speaking on the United Arab Emirates (UAE) energy strategy, Mazrouei stated that the government of UAE has declared 2023 as the ‘Year of Sustainability’, noting that the Ministry of Energy and Infrastructure has updated the UAE Energy Strategy to shift the only coal power plants that were under construction to be gas-fired.
“We will see gas replacing coal in the power sector and we hope many countries will do the same,” he added.
During the time of the energy crisis, liquefied natural gas played a key role in securing the global energy supply, especially in Europe. LNG ultimately saved the day, maintaining Europe’s energy security and allowing it to make it through the winter by keeping its lights on.
Liquefied natural gas has inherent flexibility for moving unprecedented volumes of gaseous energy flows in record time. This flexibility together with abundance, availability, and decarbonization make LNG critical and necessary for a secure, sustainable, and achievable energy transition.
In conclusion, the liquefied natural gas industry is at a crossroads and in the next 12 months, several LNG projects are expected to reach interesting phases and milestones.