LNG Projects Boom, Including Floating Plants (FLNG)/America Begins LNG Exports - Business and Industry Trends Analysis - Plunkett Research Ltd.

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LNG Projects Boom, Including Floating Plants (FLNG)/America Begins LNG Exports, Business and Industry Trends Analysis

One way to distribute natural gas to high-demand markets like China and Japan is through LNG (liquefied natural gas).  However, due to the necessity of special handling, bringing that supply to market in major quantities requires advanced technologies and huge capital outlays.  First, the natural gas must be chilled to minus 259 degrees Fahrenheit, in order for it to change into a liquid state.  Next, the LNG is put on specially designed ships where extensive insulation and refrigeration maintain the cold temperature.  Finally, it is offloaded at special receiving facilities where it is warmed and converted back into a gaseous state (“gasification”) suitable for distribution via pipelines.
However, a growing amount of supply on the global market is depressing LNG prices.  While a massive amount of investment has been planned or is underway for LNG infrastructure, soft prices may curtail the pace of development.
Qatar is a world leader in the supply of LNG.  The global LNG market includes two significant firms in Qatar:  Qatargas and RasGas.  This is due to Qatar’s ownership of one of the world’s largest conventional natural gas reservoirs, the offshore North Field.  Qatar also welcomes foreign oil and gas firms, especially ExxonMobil, which owns the RasGas gas liquefaction facility there in partnership with Qatar Petroleum.  Qatar’s largest LNG markets include Japan, India and South Korea.  
Malaysia and Indonesia are also major exporters of LNG.  Additional sources include Nigeria, Oman and Russia.  Australia and the U.S. have ramped up LNG production capacity and infrastructure.
A significant number of LNG-carrying ships have been launched recently, according to the International Gas Union (IGU).  These unique ships, costing between $175 million and $200 million each, have the ability to maintain the extreme low temperatures of their cargos until the LNG is offloaded for re-gasification.  Modern LNG ships have a carrying capacity of 165,000 to 266,000 cubic meters.  The U.S. Energy Information Administration (EIA) reported that in 2020, U.S. LNG export capacity reached 10.8 billion cubic feet per day, up from 8.9 billion cubic feet per day in 2019.
LNG facilities are immense engineering projects that take many years and serious financial commitments to complete.  For example, Chevron spent $29.7 billion on its Wheatstone LNG project in Australia, which began shipping LNG in late 2017 and has a capacity of 38.4 billion cubic feet per year.
Gas output from shale formations has boosted America to be one of the world’s largest natural gas producers.  However, in the late 1990s and early 2000s, before the shale boom picked up speed, LNG imports were expected to become a vital source for America’s gas needs, as domestic gas shortages were forecast by those who didn’t foresee the looming impact from horizontal drilling and fracking in shale fields.  A major story in TIME magazine in July 2003 stated that Americans were headed into a shortage of natural gas that was so daunting that the U.S. petrochemicals industry (highly reliant on a steady supply of natural gas) might have to move to other nations.  This brought about significant investment in new LNG terminals in Louisiana and Texas.  A company called Cheniere Energy (www.cheniere.com) completed three new LNG terminals.  Two of the completed terminals are in Louisiana and one, completed in 2008-09, is in Texas.
By 2010, however, Cheniere completely reversed its strategy.  Clearly, the supply of gas coming from America’s shale fields was so abundant that the gas industry should be exporting, not importing.  Cheniere signed long-term contracts with major customers in Europe anxious to receive LNG exported from its Sabine Pass plants.  The project received government approval in 2011, making Cheniere’s Sabine Pass location the first LNG terminal cleared to ship to countries without free trade agreements.  Shipments began in early 2016.  Cheniere’s investment in U.S. LNG plants tops $12 billion.
In 2019, Cheniere signed an agreement with China Petroleum & Chemical Corp. (known as Sinopec) to supply approximately $18 billion in LNG to China, the third long-term deal the firm has signed with Chinese companies.  China, in an effort to wean itself away from coal, has been significantly increasing its imports of LNG.  It imported 10 million tons in 2010 but expects to increase that number to 88 million tons per year by 2025.  In order to fulfill the demand, Cheniere is building a sixth LNG train (the compressor that converts natural gas into a liquid state) at its Sabine Pass, Louisiana plant at a cost of $3 billion.
A revolutionary floating LNG plant (referred to as FLNG in the energy industry) project is in operation off the northwestern coast of Australia.  Shell, working with a consortium comprised of Korea’s Samsung Heavy Industries Co. and France’s Technip SA, completed a $5 billion floating facility in mid-2017 called Prelude that is 488 yards long and 82 yards wide (its weight is 600,000 tons when fully equipped and loaded, about six times that of an aircraft carrier).  The ship required 1.6 million man-hours of design and engineering before construction.  By processing LNG offshore, previously stranded reserves that were too remote to be feasible can be tapped.  The facility can produce up to 3.7 million tons of LNG per year.  Once an underwater field is exhausted, the floating plant can be towed elsewhere.  Many other firms are active in FLNG.

Internet Research Tip:  FLNG (Floating Liquefied Natural Gas)

     ExxonMobil is also extremely active in natural gas/LNG production in the Australia area.  China has a multi-year contract with ExxonMobil, valued at $50 billion, for the delivery to China of LNG from the Gorgon project, a vast natural gas and LNG facility jointly owned by ExxonMobil, Chevron and Shell.  China is a major importer of LNG and has completed several receiving terminals along its coast.

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