For LNG developers, another year of canceled projects
18/05/2021 21:09
By Scott DiSavino
May 18 (Reuters) - This week's decision by Australia's
Woodside Petroleum Ltd WPL.AX to pull out of a big Canadian
liquefied natural gas (LNG) project was the latest blow to a
sector that has been heralded for its growth prospects
worldwide.
Demand for super-cooled LNG has surged in recent years as
large energy-consuming nations like China and India wean
themselves off dirtier coal. Demand is expected to keep hitting
fresh highs, but three North American projects have stopped
development in the past few months, as customers remain hesitant
to sign long-term purchase agreements needed for financing.
LNG terminals, where gas is cooled into a liquid for
shipping via tanker, take roughly four years to build. Investors
in new projects are wary of oversupply in coming years after
Qatar Petroleum, the world's biggest and lowest-cost LNG
producer, announced big expansion plans in February.
To be sure, there are still a dozen North American projects
in the works that could decide to kick off construction later
this year. But that's no different from 2020 and 2019, when
numerous projects were delayed or killed. Only one project
started construction in 2020. urn:newsml:reuters.com:*:nL1N2LK27O
Global demand rose 0.4% in 2020 to a record 356 million
tonnes per annum (MTPA) of LNG or 47 billion cubic feet per day
of natural gas, according to the International Group of
Liquefied Natural Gas Importers (GIIGNL). One billion cubic feet
of gas can supply about 5 million U.S. homes for a day.
Woodside has a 50% interest in the Kitimat project in
British Columbia, which it said it would sell on Monday. That
followed two other projects put on hold this year: Annova's
Brownsville in Texas in March and Pembina Pipeline Corp's
PPL.TO Jordan Cove in Oregon in April. urn:newsml:reuters.com:*:nL1N2LK262
urn:newsml:reuters.com:*:nL1N2MG1YW urn:newsml:reuters.com:*:nL3N2N503J
Sempra Energy SRE.N , meanwhile, said it would likely push
back a decision to start building its proposed Port Arthur
terminal in Texas from 2021 to 2022. urn:newsml:reuters.com:*:nL1N2MS25V
"With the Qataris adding more capacity at a very cheap cost,
it does not make financial sense for U.S. companies to be
building greenfield projects," said Matt Smith, director of
commodity research at ClipperData, a provider of commodities
data and analytics. He said it makes more sense to expand sites
with existing terminals.
Qatar Petroleum said in February it will boost output from
77 MTPA now to 110 MTPA by 2026 and possibly 126 MTPA by 2027.
urn:newsml:reuters.com:*:nL1N2KE1I1 urn:newsml:reuters.com:*:nL2N2L01TP
"Given the Qataris decision to move forward ... the global
LNG markets appear poised for another period of oversupply" that
may be dissuading buyers, said Ross Wyeno, lead analyst of
Americas LNG Analytics at S&P Global Platts.
Customers have been reluctant to sign long-term purchase
agreements after global gas TRNLTTFMc1 JKMc1 prices fell to
their lowest in years during a supply glut in 2019 when a record
number of LNG projects entered service. Last year, prices
dropped even further, hitting record lows due to coronavirus
demand destruction.
Several LNG developers, however, said they remain on track
to make decisions to start construction this year.
Pieridae Energy Ltd's PEA.TO CEO Alfred Sorensen said last
week that the company's proposed Goldboro project in Nova Scotia
was "beginning to look like ‘the last one standing.'" It plans
to make its final investment decision by the end of June.
urn:newsml:reuters.com:*:nL1N2N00XK
Tellurian Inc's TELL.O Executive Chairman Charif Souki
said last week his company was weeks away from finishing
commercialization for the first phase of its proposed Driftwood
project in Louisiana. urn:newsml:reuters.com:*:nL2N2N41NS
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
UPDATE 1-Australia's Woodside Petroleum to exit Canada's Kitimat
LNG project urn:newsml:reuters.com:*:nL3N2N503J
UPDATE 2-Annova stops development of Texas Brownsville LNG
export project urn:newsml:reuters.com:*:nL1N2LK262
Pembina pauses development of Oregon Jordan Cove LNG plant
urn:newsml:reuters.com:*:nL1N2MG1YW
UPDATE 1-Sempra likely to delay Texas Port Arthur LNG decision
to 2022 urn:newsml:reuters.com:*:nL1N2MS25V
FACTBOX-North American liquefied natural gas export projects
urn:newsml:reuters.com:*:nL1N2LK27O
UPDATE 3-Qatar Petroleum signs deal for mega-LNG expansion
urn:newsml:reuters.com:*:nL1N2KE1I1
CERAWEEK-Qatar to detail next LNG expansion within a year
urn:newsml:reuters.com:*:nL2N2L01TP
Pieridae moves closer to June decision on Nova Scotia LNG export
plant urn:newsml:reuters.com:*:nL1N2N00XK
CORRECTED-BUZZ-Tellurian closer to building U.S. LNG plant,
share up 10% urn:newsml:reuters.com:*:nL2N2N41NS
Venture Global says Zachry-KBR JV to build Plaquemines LNG plant
urn:newsml:reuters.com:*:nL1N2MM28F
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(Additional reporting by Sabrina Valle in Rio de Janeiro;
Editing by Andrea Ricci)
((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters
Messaging: scott.disavino.thomsonreuters.com@reuters.net))