(BOE Report) – Producers are pushing ahead with liquefied natural gas projects, banking on urbanisation and the technology sector to drive global power demand and outweigh such challenges as potential oversupply, rising project costs, and tariff uncertainty.
LNG is widely seen as a transition fuel on the path to net-zero emissions. Governments worldwide are also prioritising energy security after Russia’s invasion of Ukraine caused a surge in gas prices to record highs.
“Asia-Pacific economies are ravenously hungry for LNG,” said Tengku Muhammad Taufik, CEO of Malaysian state energy firm Petronas at the World Gas Conference. He said the proliferation of data centres supporting artificial intelligence (AI) was also driving demand.
Power grid outages have also underscored the need for reliable baseload power from conventional sources.
“You think customers will wait a week to have electricity? No way. They want 24/7 electricity,” Patrick Pouyanne, CEO of French major TotalEnergies. “Even if you build a beautiful renewables system… We need gas-fired power plants.”
Woodside forecasts demand for LNG will rise 50% by 2030, while Shell expects a 60% rise in demand to 630-718 million metric tons a year by 2040.
To meet that growing demand, new LNG supplies this year will mostly come from North American projects including Plaquemines LNG, Corpus Christi LNG phase 3 and LNG Canada. LNG Canada expects to ship its first cargo in June.
Other companies pursuing new LNG projects include TotalEnergies, Australia’s Woodside Energy, Commonwealth LNG and Mexico Pacific LNG.
TotalEnergies aims to lift the force majeure on its $20-billion Mozambique LNG project and resume construction by mid-summer, Pouyanne said. The project was halted in 2021 when an insurgency led by Islamic State-linked militants swept the region.
RISING COSTS
However, concern over rising costs is tempering producers about the market’s prospects. TotalEnergies, for example, is looking to cut capital expenditure at its Papua New Guinea project by 20% to 25%, and is expected to take final investment decision this year.
Woodside Energy, meanwhile, is looking to sell a further stake in the Louisiana LNG project it is developing.
Industry executives also warned that the wave of projects could lead to oversupply, which could depress prices. Ma Yongsheng, chairman of China’s Sinopec Corp, estimated new global liquefaction capacity at 420 million tons by 2030 – more than double the likely increase in LNG imports globally.
Andrew Walker, vice president for LNG strategy and communication at Cheniere Energy is also expecting new supply capacity to grow by a third to 600 million tons by 2030.
Ensuring that LNG demand keeps up requires competitive LNG pricing, especially in price-sensitive markets, such as South and Southeast Asia, which still heavily rely on coal for power generation.
“We want the price to be affordable. We don’t want southwest Asia to go to coal, because once they go to coal, that asset’s there for 40 to 60 years. It’s not good for them, it’s not good for the world,” Cheniere CEO Jack Fusco said.
(Reporting by Colleen Howe and Sam Li, writing by Emily Chow; Editing by Florence Tan and Tomasz Janowski)
