DW: North American activity to push global LNG Capex up
The LNG industry, boosted by North American activity which is driving the return to growth in global capital expenditure, is undergoing transformation, according to a report by Douglas-Westwood (DW).
Global LNG expenditure is expected to total US$284 billion between 2017 and 2021, representing a 50 percent growth compared with the preceding five-year period.
A wave of new LNG carrier newbuilds will also be required to support a huge increase in traded base-load LNG volumes, the report shows.
Liquefaction terminals will remain the principal driver of expenditure with spend in the segment totalling $192 billion, which will subsequently lead to a 42 percent increase in liquefaction capacity by the end of the forecast period.
Despite challenging times for shipyards, with only four LNG carriers ordered in 2016 so far, however, unit orders are expected to bounce back in the near-term.
DW noted that over 150 additional carriers yet to be ordered are likely to be required for additional export capacity coming onstream in the latter years of the forecast. Overall the expected expenditure on LNG carriers will represent 19 percent of global expenditure.
As the final set of Australian LNG projects start operating in 2017, global LNG expenditure will be concentrated in North America. This regional swing in investment will result in the United States and Canada accounting for 17 percent of global liquefaction capacity by 2021, with Capex totalling $105 billion, 36 percent of global expenditure over the forecast period.
Of the six liquefaction terminals in the US, four of the facilities are currently under construction, with additional trains to be added before the end of the period.
Beyond the forecast, some export terminals currently in the planning and approval stages will continue to support expenditure.
Douglas-Westwood, however, has taken a conservative view on additional projects, given the current economic climate, and expects many of the early-stage projects not to progress past the initial planning/consent phase.
Over the long-term, LNG demand will continue to grow, as countries seek to diversify their energy supply, DW says.
It is expected that delays in committing to new nuclear capacity and limitations of renewable technology in base-load applications will support continued newbuild of combined-cycle gas power plants. This, in addition to declining local production in some key consumer nations, will be a compelling driver for continued investment in these capital intensive projects.