North American Venture Growth Dwindles As LNG Costs Rise

North American Venture Growth Dwindles As LNG Costs Rise

While the appetite for LNG has never recorded such heights, producers in North-America are approaching the end of 2021 without possessing authorization for a single construction venture. Worldwide natural gas costs are approaching historic peaks, as operators in Europe and Asia scramble for any LNG cargoes available before wintertime. LNG demand has grown annually since 2012 and by 40% in the previous five years as utilities switch from dirtier-burning coal to cleaner-burning gas, but output has not caught up with the demand – and will not in a few years.

The market’s expansion accelerated the construction of liquefaction facilities in major exporters, such as the United States, which is on track to become the world’s largest LNG generator next year. Nevertheless, new project investment ground to a standstill in 2020, as low prices created by covid-induced supply disruptions discouraged customers from entering long-term supply agreements.

Majority Of Enterprises’ Proposal Delayed Till 2022

Around a dozen, enterprises expressed intentions for formal investment decisions (FID) on development proposals at the beginning of 2020 and again in 2021. However, only one, Sempra Energy’s Costa Azul in Mexico, broke ground in 2020, whereas others were delayed until 2022. “We are preparing for a fundamental LNG production constraint,” Reid Morrison, world energy consulting head at PwC in Houston, said. “There is an unwillingness to accept a major stake in natural gas in light of the various countries’ net-zero pledges.”

Numerous North American developments, particularly in Texas and Louisiana, may proceed in 2022 when the International Gas Union expects global demand will increase to around 375 million tonnes per annum (MTPA) from 356.1 MTPA in 2020. However, those projects will contribute little to meeting expanding demand in the near term, because it takes approximately 3 to 5 years for a new LNG facility to begin production.

“This competitive industry could last well beyond 2025,” said Anatol Feygin, senior commercial director of Cheniere Energy Inc., a US LNG producer. The industry is “crying out for additional capacity,” he said. Proposals, Woodfibre by Pacific Energy Corp Ltd in British Columbia and Plaquemines by Venture Global LNG in Louisiana, may receive approval later this year.

Venture Global Granted Permission By The US

Venture Global was granted authorization by the US authorities to begin early construction work on Plaquemines, and subsidiaries of China Petroleum & Chemical Corp, or Sinopec, committed to long-term LNG procurement contracts with the corporation.

Plaquemines would be capable of generating up to 20 million tonnes per year (MTPA) of LNG or 2.6 billion cubic feet per day (BCFD) of natural gas. One billion cubic feet of water is sufficient to power around five million homes for one day. It is due to commence producing LNG as early as 2024.

Venture International did not respond to a request for comment. The business stated on its website that it intended to choose Plaquemines in the final quarter of 2021.

Venture Global currently has around 70 MTPA of LNG export capacity under development or production in Louisiana, along with the 10-MTPA Calcasieu project, which is expected to begin production later this year.

Pacific Oil and Gas’ Woodfibre project would generate approximately 2.1 million tonnes per annum of LNG, not till 2025, experts estimate. The corporation has not made a final decision on building, despite a recent agreement to supply 1.5 million tonnes per annum of LNG to British oil major BP PLC for 15 years.

“We are in the process of finalizing our construction contract and are confident about moving forward with the project this year,” Woodfibre LNG representative Rebecca Scott told reporters.