New wave of mega LNG projects is approaching

FILE PHOTO: An offshore LNG regasification terminal, the FSRU Toscana, is towed into Valletta’s Grand Harbour July 1, 2013. REUTERS/Darrin Zammit Lupi/File Photo

LONDON (Reuters) – A new race to build multi-billion dollar liquefied natural gas (LNG) plants is gaining momentum after a long hiatus in investments as energy giants sense a widening supply gap within five years. Spending on new, complex facilities that super-chill gas into liquid in order to allow its transportation dried up following the collapse in energy prices in 2014. Appetite was further dampened by fears that a plethora of LNG plants built since the late 2000s would lead to a large supply glut until early in the next decade. But sentiment has radically changed over the past year. Buoyed by rising oil prices and exceptionally strong demand from rapidly growing economies such as China and India, executives are increasingly confident conditions are once again ripe for new projects. Qatar, the world’s largest LNG producer, is preparing to expand its facilities by around one third to produce 100-108 million tonnes per year (mtpa) by 2023-2024. “The glut that people see I don’t see … If you just count on being pessimistic about the market, and don’t build expansions, you will never catch that upside when the market is up,” Saad al-Kaabi, the head of Qatar Petroleum, told Reuters in May. The state-owned company expects long-standing partners Exxon Mobil (XOM.N), Royal Dutch Shell (RDSa.AS), Total (TOTF.PA) and ConocoPhillips (COP.N) to help build and fund the new expansion phases as well as possibly new entrants, he said. A major change in the outlook happened after China strongly boosted imports of LNG in recent years to reduce coal burn in its fight against pollution. “The supply-demand balance definitely looks more favourable towards producers these days,” said Philippe Sauquet, the head of gas at France’s Total, the world’s second largest LNG trader after Shell. “China will continue to make the real difference in demand. I don’t see them slowing down. They are shifting attention to building more and more infrastructure,” Sauquet told Reuters.