LNG

LNG fantasy falters

LNG World News, June 20, 2016

The latest research by McKinsey Energy Insights (MEI) predicts the LNG oversupply could last until 2024, meaning few projects could reach financial investment decision in the next 12 to 18 months. 

The research shows the LNG supply glut is“exacerbated by the 100 million tons per annum of new export terminal capacity currently under construction in the United States and Australia.”

By 2019, MEI expects the oversupply to peak at 60 mtpa.

According to James Walker said, “Our research shows that the current market oversupply is creating challenging conditions for operators hoping to take FID on projects in the near term.”

He adds that, in order to be viable, such projects would require an assumption of either a sustained high LNG price post-2024 or a cost optimization strategy to reduce projected capital expenditures.

In an oversupplied market, many projects will struggle to secure buyers, Walker said, adding that, even if the projects move to the construction phase, LNG supply would hit the market at a bad time.

The research predicts that the market will remain oversupplied unless the current low prices can stimulate a demand recovery, however, that response has been limited over the past two years.

lelu-island-proposal-graphic
Photograph from Warrior Publications

Categories: LNG, Natural Gas

11 replies »

  1. Maybe I’m missing something but it seems that the BC Liberal Party has gone very silent on the LNG file in the last month or so. Even the commercials on television from the LNG Alliance of BC have all but disappeared from the airwaves. Could it be that Christy & Co. are now trying to distance themselves from the 2013 unattainable promises they ran and won on?

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  2. That means that all the natural gas reserves in BC can potentially be used here in BC instead, as a transport fuel, for example.

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  3. !0 yrs. late, trillions of dollars short, still lots of kool aid drinking folks who cannot fathom the realities of commodity markets and pricing. Thanks for the continual flow of truthful material Norm, you should be required reading for all voters in BC!

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  4. “He adds that, in order to be viable, such projects would require an assumption of either a sustained high LNG price post-2024 or a cost optimization strategy to reduce projected capital expenditures.”

    Would a cost optimization strategy include a twenty-five year contract guaranteeing very low royalty obligations to be paid only after capital costs have been recouped? And would it include floating the processing plant to BC after building it cheaply offshore with no Canadian labor or materials?

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  5. Gee,if Vancouver Island separates from B.C. we won’t get to share in her highness’s LNG fantasy…my goodness,I wish she would disappear

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    • Do you think Vancouver Island would keep her? I somehow doubt that! In fact I think they would separate on condition that they wouldn’t have to have anything to do with her. Maybe they’d go over to Trump’s camp.

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  6. You all must be missing something. The Prosperity Fund has $100M in it so the LNG industry must be in full swing to have accumulated that much money already. Wonder where the processing plant is?

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    • I have $10,000 in my personal prosperity fund. I don’t actually have it in cash, it’s just a notional amount in my personal financial records. If I need to spend part of it, I’ll ask my wife to borrow some money and give it me. I’ll have to co-sign her loan but… well, we just won’t talk about that.

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  7. Despite the lowered price of LNG, demand, particularly in Asia, has stalled or slid downward. One reason why that is so is that the US$ exchange rate of Asian currencies – particularly the Japanese yen – has slid just as quickly as has the price of LNG (which is denominated in US$). Ergo- LNG is barely less expensive in those currencies than when Fukushima happened.

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