This is the second of two articles  that examine the growth of LNG supply and demand over the period 2015-2035. Areas covered include the following:
- Brief review of forecast LNG demand, 2015-2035.
- Analysis of forecast LNG supply, 2015-2035, including liquefaction capacity by probability, and forecast LNG export availability by country.
World LNG Demand, 2015-2035
Against the background of growing world energy and gas demand,
the supply of LNG has increased over the last 50 years to an
estimated 333bcm (242mt) in 2014, accounting for 33% of gas
internationally traded and around 10% of total gas consumption.
Our previous article explained the reasons for the wide variation
of LNG demand forecasts between 540bcm-940bcm (391mt-681mt) by 2035.
The range of forecasts reflects the sensitivity of LNG demand to
uncertain variables such as the availability and price of pipeline
gas, competing energy sources, regulatory intervention and environmental
policies. Reflecting this uncertainty, we have developed a Forecast
LNG Demand Zone, including our High and Low Cases as well as a Mid
Case based on Cedigaz’ LNG demand forecast for 2035 of 716bcm (519mt).
Figure 1 - Range of LNG demand forecasts 2015-2035
World LNG supply, 2015-2035
Whilst the global LNG market has grown steadily in an environment where supply and demand were roughly balanced, future growth may be very different as existing and new LNG producers throughout the world have proposed a large number of LNG supply projects. With LNG demand potentially expected to double by 2035, the number of LNG supplier countries could reach thirty, with a combination of large projects from countries such as Australia, Canada, Mozambique and the USA, and smaller projects from countries such as Cameroon and Colombia, although competition for LNG buyers who are prepared to commit to 15-20 year LNG purchase contracts is becoming increasingly fierce. In order to understand how the LNG market is likely to develop, we have undertaken a country-by-country analysis of 28 existing and future potential LNG supplier countries to assess both the availability of future liquefaction capacity and the utilization of that capacity for the period 2015-2035 . The following two charts are a selection of those produced from this analysis.
Figure 2 provides a comparison of all LNG export capacity that is currently
either in use, under construction or planned during the period 2015-2035
together with the range of LNG demand forecasts 2015-2035. Planned projects
have been ranked High, Medium or Low based on the probability of completion.
Figure 2 - Forecast LNG liquefaction capacity by probability and forecast LNG demand 2015-2035
With LNG demand forecast to be in the range 540bcm-940bcm by 2035 and the aggregate of existing, under construction and planned LNG export capacity in excess of 1800bcm/year, it is likely that a large number of proposed LNG export projects will not be built. Indeed, given the number of LNG export projects currently under construction if LNG demand fails to rise above 540bcm by 2035 (due to the growth of renewables, nuclear and coal) very little additional capacity, if any would be built.
We have also modelled the potential availability of LNG exports from each country using three scenarios based on a number of key physical and technical drivers, together with an assessment of the developers’ capability to progress high capex technically complex projects, and the likely utilisation of the facilities depending on gas price and contract arrangements.
Using our Mid Case scenario Figure 3 provides a comparison of actual
and forecast LNG export availability with the range of LNG forecast
demands 2015-2035 from which we can draw a number of conclusions.
Figure 3 – LNG export availability by country
During the period 2011 to 2014 the LNG market experienced a degree of tightness, caused amongst other things by the impact of the Fukushima disaster, force majeure in Egypt, and the knock-on effect of the 2008/09 financial crisis on project financing.
Looking ahead to the period 2015-2025 it seems likely that the
LNG market will tend to go somewhat long for much of this time,
driven by huge quantities of new supply in Australia and USA and
well as potential expansion elsewhere.
For the longer-term a key factor will be the rate of growth of gas demand, and the extent to which climate change mitigation attempts and other economic and social drivers impact on LNG utilisation.
Whilst a range of outcomes is possible, and forecasting over such a long period is challenging, we see the LNG market beginning to tighten to some extent post-2025, although in most scenarios the supply/demand match remains manageable.
Our analysis reveals that a shift in LNG supply dynamics and geography is likely.
- Whilst Qatar will remain a major LNG supplier, it will be matched by first Australia and later USA, with the result that by 2035 these three suppliers will together account for 46% of world LNG supply, compared to 2014 when Qatar on its own accounted for 32%.
- Australian growth is ideally placed to supply growing demand in Asia Pacific, whilst US supply is well located for European and Central and South America demand.
- Depending on developments in East Africa and elsewhere, Qatar may find itself pushed out of European markets to some extent and left to compete with Australia and other suppliers for Asian demand.
- A large tranche of the potential new Russian supplies – from Yamal LNG – is also likely to target European markets.
- Further American developments – either the construction of liquefaction capacity on the West Coast of North America (Alaska, Canada or Oregon), the expansion of the Panama Canal, or the completion of the proposed Nicaragua Canal, could also see North American LNG supplies competing strongly in Asia.
A key challenge will be securing the markets and contracts to enabling financing of new LNG projects, a challenge which will become greater if the world starts to respond to calls of bodies such as the Intergovernmental Panel on Climate Change to reduce carbon dioxide emissions by 50% by 2050. It seems likely that LNG supplies will be strong. It is perhaps less certain that demand will be.
- LNG DEMAND TO MORE THAN DOUBLE BY 2035 (part 1)
- LNG Supply Handbook 2015-2035
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