Countries from Australia to Tanzania have scrambled to start exporting liquefied natural gas. Who's going to buy it all?
Companies around the world are spending billions of dollars in a scramble to start exporting ever-greater amounts of natural gas with hopes of feeding a seemingly insatiable appetite for the clean-burning fuel. There's just one problem, which could affect everybody from New Orleans to New South Wales: The world may already have more than it needs.
So much natural gas export capacity has already come online -- and there's so much more in the pipeline -- that it risks swamping what demand there will be for the stuff. Qatar, Australia, the United States, and Canada are all aboard or jumping onto the liquefied natural gas (LNG) bandwagon, but it's unclear just who will buy it all and at what price. That has companies from Exxon to Australia's Woodside Petroleum rethinking their ambitious gas-export plans and countries from Mozambique to Canada angling to craft incentives to reassure increasingly gun-shy natural gas investors.
"The amount of supply that we have in the works already coming online in the next five years exceeds reasonable assumptions of demand growth," said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University.
Fear of a gas glut, coming just after the world began scrambling to take advantage of what the International Energy Agency (IEA) calls the "golden age of gas," underscores the cyclical nature of a business reliant on huge upfront investments and lengthy lead times. That creates the risk of a boom-and-bust cycle where companies rush to meet projected demand, then panic after everyone else does the same. Goldman Sachs said earlier this month that oversupply could put a number of currently planned, high-profile LNG projects at risk.
That appears to be what's happening now. The world already has more LNG trading capacity than it needs: There were about 286 million tons a year of LNG export capacity globally in 2013, while global LNG trade amounted to just 237 million tons.
That's in part a reflection of a big surge by Qatar, the world's leading exporter of liquefied natural gas. Between 2008 and 2011, Qatar built a spate of new projects and now has 77 million tons a year of LNG export capacity.
Now, other gas-producing countries are scrambling to add even more. Australia has three big LNG projects operating and seven more that will come online in the next few years. If all goes as planned, that would push Australia's total export capacity to 83 million tons a year by 2017, which would allow the country to overtake Qatar as the world's top LNG exporter. Even more export projects are under discussion there.
Meanwhile, the United States is moving to take advantage of its own natural gas production boom to turn from gas importer to gas exporter. The Department of Energy has conditionally approved eight U.S. LNG export projects, with a total capacity of more than 80 million tons a year; analysts expect that at least five of those projects could actually get built, with an export capacity of close to 70 million tons. Canada is also hoping to ship natural gas to Asia.
As if that weren't enough, newcomers to the global energy boom, including countries in East Africa and the eastern Mediterranean, are also eyeing LNG exports as a way to fuel their own economic development.
The problem is figuring out just how much demand there really will be for all that gas. Asia, and especially China, is expected to be the main driver, accounting for the overwhelming bulk of natural gas demand in the years to come, according to the IEA.
But there are several huge question marks that could radically affect those projections. Japan's imports of LNG have surged since 2011, when it shut down all its nuclear power plants in the wake of the Fukushima accident. Buying so much expensive gas is not a long-term option for Japan -- fuel imports pushed the country to its first trade deficit in more than three decades. The question for Shinzo Abe's government is not whether, but when, the country will restart at least a portion of its nuclear reactors, which would severely dampen Japanese demand for LNG.
The other big question marks are in China. In theory, as China cleans up its economy and environment, it will need a lot more natural gas. But it's not clear just how much -- or whether it has already lined up much of what it will need.
Beijing has already signed one huge, $400 billion natural gas deal with Russia to get significant amounts of Siberian gas through a pipeline. The two countries are reportedly in talks on another gas deal that would give China even more Russian gas, further reducing Beijing's demand for expensive imported LNG
The Straight Goods have foretold this story for several years now..
So grandiose were the BC Liberal`s promises..
"LNG we pay off our provincial debt...LNG will create a $100 billion dollar prosperity fund..LNG will eliminate our sales tax,...LNG will pay off all crown corporation debt, remove bridge tolls, ..LNG will pay for new schools and hospitals...LNG will create over 100,000 jobs"
Every BC Liberal told the above lies.
Now as of late...These BC Liberals have ruled out the prosperity fund, ruled out debt elimination, now they use words like "help with the debt"....Already before even 1 final investment decision the expected dollars are falling off the table....
Western Australia where most of their LNG plants are...They is in big trouble...their debt in 2008 was $3 billion, today their debt is $30 billion...most of that debt was for infrastructure to service these LNG plants and now those LNG plants can barely get a gas price to cover expenses...
China is making huge strides in developing their own domestic natural gas supplies..By 2020 China will producing 40% of the gas needs domestically..
And the news keeps getting worse for BC`s late to the game LNG scam...China has signed another huge deal with Russia just today...A second natural gas pipeline from Russia to China, no $40 billion dollar liquefaction plants required..
Australian LNG producers are in panic mode, besides 3 big LNG plants in operation 7 more LNG plants are to come online by 2016/2017 making Australia the world`s largest exporter of LNG..
How much more bad news is there on the LNG front...Japan has okayed and announced the start-up of 2 nuclear reactors in short order, probably by mid January/2015...This is not idle talk, uranium miners in B.C. have seen their stock prices soar as the inevitable Japanese nuclear restarts dates fastly approach...
The above article tells it straight up...Without any new proposed LNG plants being built, with just the plants under current construction there is more capacity than demand...All that gas won`t be bought..
The below story was written before Russia and China inked another natural gas supply deal..
The monster profits are gone, what the BC Liberals promised BCers in revenues will never accrue, not even 1 1/1000th of what they promised, more likely British Columbia will add 10s of $billions more debt to our current $80 billion dollar debt by providing infrastructure and incentives to these massive companies..
I`m not not when our corporate controlled media will step up to the plate and ask the right questions, ask any questions...probably never..
At this point in time, British Columbia would be better off leaving the gas in the ground...The financials numbers can`t work, at least not for government revenues...
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