The Global LNG Market: The Rise of LNG Production

As the global energy landscape evolves, recent projections and industry updates highlight the dynamic shifts within the global natural gas sector. In April 2024, the U.S. Energy Information Administration (EIA) anticipated a modest increase in U.S. LNG exports for the year (2%) followed by significant growth in 2025 (an additional 18%). This growth is mirrored by expectations for a rise in U.S. natural gas exports by pipeline (3% in 2024, 4% in 2025) and a slight dip and recovery in pipeline imports in 2024 and 2025, respectively. Concurrently, S&P Global Ratings forecasted stable hydrocarbon prices supported by the Organization of the Petroleum Exporting Countries (OPEC), alongside a year-end rebound in gas prices driven by LNG export expansion and infrastructure developments.

“Low U.S. natural gas prices will likely continue for at least the next 10 years, fueling more LNG developments due to the low base price of natural gas,” said Marybeth McBain Product Line Manager - IGC New Apparatus, Global Sales at Ebara Elliott Energy.

This price point will not only bolster further LNG developments but also the construction of natural gas combined-cycle (NGCC) power plants. “The low and cleaner natural gas fuel will propel more NGCC power plants to be constructed, which provide reliable baseload power to supplement a growing renewables portfolio for the U.S. electric grid—eight new NGCC plants since 2022. This favors all gas-fired turbomachinery supporting the natural gas industry in the United States,” McBain said.

In this context, emerging trends such as modularization and the adoption of e-LNG technologies are reshaping the industry. “LNG projects are requiring modularization to eliminate risk in the field, i.e., stick built, in addition to a decline in available field labor,” said Joel Schubert, Director of Business Development LNG at Siemens Energy. “We also see a trend for future LNG projects going forward with e-LNG (electric motor drives) to reduce emissions and their carbon footprint.”

Moreover, the broader shift toward decarbonization and emissions reduction in LNG projects has started to affect LNG new developments. “Operators are considering greenhouse gas emissions, making changes in design accordingly, and moving toward electrification of some, if not all, of the major compression/pumps in the LNG plant,” McBain said.

Furthermore, Christopher Campos, Area Sales Manager, New Apparatus at Ebara Elliott Energy, said, “The offshore LNG market remains strong despite the current slowdown in the market due to pricing and policy shifts.” He said offshore floating LNG (FLNG) units continue to drive investors to look at capacity space with a limited number of shipyards. “In 2023, we saw Petronas invest in its third FLNG unit while 2024 saw a final investment decision (FID) by Cedar LNG for Canada. Golar is looking at re-purposing Golar Hilli Episeyo for its next area of operation in Argentina. Genting FLNG, an investment by Genting Oil & Gas in Indonesia, contracted out the construction of its first FLNG unit in 2024.”

GLOBAL OUTLOOK

Two trends are poised to send the global LNG markets into oversupply within two years: lackluster demand growth combined with a massive wave of new export capacity, according to a report from the Institute for Energy Economics and Financial Analysis (IEEFA), Global LNG Outlook 2024 – 2028.

The global LNG market is slated to experience a shift starting in late 2024, as a wave of new liquefaction projects comes online. IEEFA expects global LNG production capacity (only projects under construction or approved by financially capable backers) to grow by roughly 193 MTPA from 2024 - 2028, rising from ~474 MTPA of nameplate capacity at the beginning of 2024 to 666.5 MTPA by the end of 2028—the fastest capacity growth in the history of the global LNG industry, representing a 40% increase in five years.

During 2024, only 12 MTPA of liquefaction capacity is slated to come online in the Republic of Congo, Mexico, Russia, Mauritania/Senegal, Australia, and the United States. Two of these new projects shipped their first cargoes earlier this year. But late 2024/early 2025 will see a new wave of LNG supply: IEEFA expects ~ 37 MTPA of new LNG facilities to start operations in 2025, with 57 MTPA of new capacity in 2026—the most ever built in a single year. IEEFA sees more LNG capacity additions of (FIGURE 1):

• 44 MTPA in 2027
• 43 MTPA in 2028

Note, this excludes any proposed global LNG projects that have not reached FID and the several projects that are moving forward but don’t have a completion date until 2029 or later.

Emerging Asian Markets: Structural LNG demand growth faces challenges, according to IEEFA: economic, political, financial, and logistical. “The global LNG crisis of the last several years heightened those challenges, spurring some Asian nations to reduce the role of LNG in their development plans and accelerate the development of alternative energy sources.”

Japan, South Korea, Europe: Combined imports fell in 2023 in Japan, South Korea, and Europe—a trio of countries that account for more than half of the world’s LNG demand—and IEEFA predicts they will likely continue falling through 2030.

Russia’s invasion of Ukraine spurred a decline in Russian gas supply to Europe that led to a spike in European LNG imports. However, prices have retreated from 2022 levels, largely due to falling demand from developed economies.

United States+: The United States, Australia, and Qatar produced three-fifths of the world’s LNG in 2023. Now, for the first time, the United States is no. 1 among global LNG exporters—the first U.S. LNG terminal started up on the Gulf Coast in early 2016. Most of the new LNG capacity slated through 2028 will be concentrated in the United States and Qatar, pushing Australia—the world’s top LNG exporter in 2021 and 2022—to third among global suppliers.

Mark Axford, President of Axford Turbine Consultants, cited in his report from CERAWeek 2024 a disrupting event that completely changed the worldwide energy picture and pushed the United States to the top: “The Nord Stream pipeline blowing up in 2022 was the single-most important occurrence in energy markets in decades. Since then, the United States has gone from third in LNG production to no. 1, with 24% share.”

Today, there are seven operating LNG facilities in the continental United States, with a combined nameplate capacity of 92.3 MTPA of LNG, about one-fifth of the world’s total (TABLE 1).

MAJOR LNG SUPPLY ADDITIONS

IEEFA said the LNG industry’s capacity to export U.S. gas is set to grow from 94 MTPA to 172 MTPA by 2028. Five U.S. LNG projects, totaling more than 71 MTPA in liquefaction capacity, are currently under construction:

• Plaquemines LNG (18 MTPA)
• Golden Pass LNG (16 MTPA)
• Rio Grande LNG (15 MTPA)
• Port Arthur LNG (12 MTPA)
• An expansion at Corpus Christi LNG (10 MTPA)

A 1.4-MTPA Mexican project sourced with U.S. gas recently shipped its first cargo and an additional 6 MTPA of U.S.-sourced LNG projects are moving forward in Mexico. IEEFA reports:

• Qatar: The development of the North Field complex will boost Qatar’s liquefaction capacity by 64 MTPA through 2030.
• Russia: The initial phase of the 20-MTPA Arctic LNG 2 project received its first gas in late 2023.
• Canada: The country’s first commercial-scale LNG plant is slated to start operations in 2025 or 2026.
• Africa: Five projects have reached FID or are under construction in Africa.

Campos said that additional LNG carrier fleets have been added to the new-build bookings to support new liquefaction terminals coming online in Qatar, the United States, and Canada. Continued investment in bunkering vessels and LNG-as-a-fuel is still contributing to new-build bookings.

INDUSTRY UPDATES

The industry continues to move forward with successful deliveries and progress for liquefaction and pipeline projects.

Siemens Energy

Siemens Energy successfully delivered, commissioned, and commercially operated its hybrid application for Chart Energy and Chemicals: a nitrogen refrigeration compressor STC-GV (20-3-H) package, powered by a STG-300 2S LE gas turbine. It integrates a synchronous motor/generator into a turbine-compressor configuration and includes online changeover capabilities from motor-to-generator modes and vice versa, supporting a transition to low-emission technology in compliance with local environmental regulations. The integration ensures that surplus power generated by Siemens Energy’s equipment contributes to the local power grid.

Siemens Energy has several recent and upcoming shipments and updates regarding Woodfibre LNG, a 2.1 MTPA export facility with 250,000 cubic meters of floating storage capacity being built near Squamish, British Columbia:

• Boil-off gas (BOG) compressors 1 & 2 were successfully delivered on July 16.
• Feed gas booster (FGB) compressor will be shipped in mid-August—the company is waiting for date/vessel confirmation from MDR.
• BOG/FGB Powerhouses will be delivered at the end of September.
• All main refrigeration (MF) and propane (C3) compressors have been successfully tested.
• MR LP completed unit test preparation. String test is currently planned for the end of August.
• Delivery of the LP MR train is planned for mid-October.
• MR HP/C3 Complete Unit Test is planned for the end of November.
• Delivery of the MR HP/C3 train is planned for January 2025.

Cheniere

Cheniere said it remains full-speed ahead on its current and future expansion projects. It continues to make progress on its Corpus Christi Liquefaction (CCL) Stage 3 Project and remains optimistic that it will achieve first LNG from the first train by the end of the year.

“We are confident we will secure all the regulatory approvals needed for the Midscale Trains 8 & 9 Project at Corpus Christi and the Sabine Pass Liquefaction (SPL) Expansion Project within our expected timelines,” said Bernardo Fallas, Director of Communications at Cheniere. “We recently received our environmental assessment for Midscale Trains 8 & 9, and we are in pre-filing with FERC for the SPL Expansion Project.”

In terms of pipelines, Fallas said the Sabine Crossing Pipeline Project is proposing a 58-mile pipeline extending east from Texas to the proposed SPL Expansion Project in Cameron, Louisiana, to support the natural gas needs of the project. The proposed pipeline would transport up to a maximum of approximately 2.7 billion cubic feet per day (Bcf/d) of natural gas to SPL from receipt points to be developed.

On July 1, the ADCC Pipeline entered commercial service and can provide approximately 1.7 Bcf/d of natural gas transportation capacity to the Cheniere CCL facility from markets on Whistler Pipeline’s Agua Dulce Header in South Texas.

In late July, Texas LNG Brownsville announced that they converted the two heads of agreement (HOA) with EQT Corp. to a definitive tolling agreement for 2.0 MTPA of LNG offtake. The FID is anticipated by late 2024/early 2025.

Also in late July, Woodside Energy purchased Tellurian Driftwood LNG—it is looking to reach FID in the first quarter of 2025; as part of the FID process, Woodside plans to examine equity sell-down options (up to 50%).

DOE'S EXPORT PAUSE

In January 2024, the U.S. Department of Energy (DOE) paused new authorizations for LNG exports to non-free trade agreement (NFTA) nations. The industry pushed back heavily on the pause, calling it “the worst energy decision made so far by the current administration,” according to Mike Sommers, President & CEO of the American Petroleum Institute.

Some projects were affected by the pause: Commonwealth LNG was stalled and is costing the project millions due to inflation while it sits still. In late June, Kimmeridge Texas Gas closed a follow-on control investment in Commonwealth LNG, raising its equity ownership to 90%. After selling his control to Kimmeridge, Founder and Executive Chairman of Commonwealth LNG, Paul Varello, announced his retirement. The pause also impacted Venture Global’s Calcasieu Pass 2 (CP2) LNG in Louisiana; however, on June 27, FERC issued a certificate that allowed CP2 to move forward.

But industry agencies said the pause would not alter the short-term trajectory of the U.S. LNG buildout. In April, IEEFA said: “Five new U.S. liquefaction projects, as well as two Mexican projects sourced with U.S. gas, are under construction and have already been cleared to export to NFTA nations. The projects have a collective capacity of 78 MTPA, meaning—pause or no—the U.S. gas industry is preparing for 85% growth in LNG export capacity by 2028.”

McBain said: “There remains a general acknowledgment in the industry that LNG expansions are continuing to move forward with FERC on a case-by-case basis. Also, the sentiment is that more LNG new licenses will be approved once the election is finalized— regardless of which political party wins.”

Relief came on July 1, when U.S. District Judge James Cain in Lake Charles, LA, ordered the Administration to lift the pause until a lawsuit brought on by 16 Republican-led states—who argued that freezing approvals of LNG exports was “completely without reason or logic”—could be resolved.

“We are encouraged by the recent ruling and expect it will facilitate DOE’s continued processing of LNG export applications,” Fallas said. “We previously stated that we did not believe the DOE pause materially impacted the timelines of our overall projects, and we continue to believe that to be true.”

REFERENCES:

1. https://www.eia.gov/todayinenergy/detail.php?id=61863#:~:text=We%20forecast%20that%20U.S.%20LNG,and%20by%204%25%20in%202025.
2. https://www.spglobal.com/ratings/en/research/articles/230627-clear-lng-outlook-could-turn-murky-near-end-of-decade-12770037
3. https://www.energyintel.com/00000190-5b31-de9d-a3d4-5bf1bdb80000
4. https://www.energyintel.com/00000190-5143-de9d-a3d4-5bc391500000