By Scott DiSavino
Nov 8 (Reuters) - Demand for liquefied natural gas (LNG) has
never been higher, but developers in North America are headed
into the final weeks of the year without having approved one new
project yet.
Global natural gas prices are near record highs, as
utilities in Europe and Asia compete for whatever LNG cargoes
they can get before winter. LNG demand worldwide has increased
every year since 2012 and soared by 40% in the last five as
utilities substitute gas for dirtier-burning coal, but supply
has not kept up with demand - and won't for several years.
The market's growth spurred rapid development of
liquefaction terminals in big exporters including the United
States, slated to become the largest LNG producer by capacity
next year.
However, spending on new projects halted in 2020, as low
prices from coronavirus-induced demand destruction caused buyers
to back away from signing long-term supply contracts.
At the start of 2020 and again in 2021, roughly a dozen
firms signaled plans for final investment decisions (FID) on
proposed projects. But just one, Sempra Energy's Costa
Azul in Mexico, started construction in 2020, while numerous
others have been pushed into 2022.
"We're setting up for a structural shortage of LNG
capacity," said Reid Morrison, global energy advisory leader at
PwC in Houston. "There is reticence to taking a long-term
position in natural gas given the net zero commitments that
different governments are making."
TIME LAG
Several North American projects could go forward in 2022,
mostly in Texas and Louisiana, when the International Gas Union
estimates world demand will reach about 375 million tonnes per
annum (MTPA) from 356.1 MTPA in 2020.
But those projects will do little to meet growing demand in
the short term since it takes about three to five years for a
new project to produce LNG.
"This tight market could extend well through 2025," said
Anatol Feygin, chief commercial officer at U.S. LNG producer
Cheniere Energy Inc. The market is "calling for new
capacity to be added," he said.
There are two projects that could get the go-ahead later
this year: Pacific Energy Corp Ltd's Woodfibre in British
Columbia and Venture Global LNG's Plaquemines in Louisiana.
The U.S. government granted Venture Global permission to
start early site work on Plaquemines, and units of China
Petroleum & Chemical Corp, or Sinopec, agreed to
long-term LNG purchase agreements with the company.
Plaquemines would produce up to 20 MTPA of LNG, or 2.6
billion cubic feet per day (bcfd) of natural gas. One billion
cubic feet is enough for about five million homes for a day. It
is expected to be ready to produce its first LNG as soon as
2024.
Venture Global declined to comment. On its website, the
company said it planned to make a decision on Plaquemines in the
fourth quarter of 2021.
Venture Global has about 70 MTPA of LNG export capacity
under construction or in development in Louisiana, including the
10-MTPA Calcasieu in Louisiana, which will likely start
producing this year.
Pacific Oil and Gas' Woodfibre would produce about 2.1 MTPA
of LNG, but not until 2025, analysts estimate. The company has
not made a final decision on construction, even though it
recently agreed to sell 1.5 MTPA of LNG to British oil major BP
PLC over 15 years.
"We are continuing to finalize our construction contract and
are optimistic to be moving the project forward this year,"
Woodfibre LNG spokesperson Rebecca Scott told Reuters.
(Reporting by Scott DiSavino; editing by John Stonestreet)
