H1 Global LNG Liquefaction and Regasification Capacity Outlook, New Study now Available on ASDReports

Wednesday 8 October 2014, Amsterdam

Natural gas has become the world’s energy of choice, with demand growing at more than twice the demand for oil. Natural gas is more environmentally friendly than oil and is replacing fuel oil in power generation and industrial uses.

The abundance of low cost natural gas in the US and Canada and the recent natural gas discoveries in Mozambique will impact the pricing structure of Liquefied Natural Gas (LNG) contracts and trade flows. The fracking of gas deposits in the US has resulted in a surplus natural gas position and changed the industry’s focus to exporting natural gas via the construction of LNG liquefaction facilities in the US Gulf Coast as well as in the east and west coast areas. The landscape for exporting western Canadian natural gas is also changing. There are 14 LNG terminals proposed for the coast of British Columbia, seven of which have been granted export permits by the government. More than US$30 billion will be invested initially in Mozambique’s natural gas sector to build the liquefaction capacity to produce 20 million metric tons per year (mmty) (974.0 billion cubic feet (bcf)) of LNG, with the first exports due to start in 2018 and 2019. Around 180 trillion cubic feet (tcf) of gas has been found in Mozambique’s offshore Rovuma Basin, enough to supply Germany, Britain, France and Italy for 18 years.

LNG regasification facilities will be required in Europe and Asia to receive increases in LNG imports. The Ukraine-Russia situation has resulted in the EU suspending the approval of the South Stream Pipeline that will bring incremental volumes of natural gas into Europe and bypass Ukraine. A number of EU countries rely on Russian natural gas supplies and are thus reviewing options to lower their dependence. An option is building regasification facilities that will take LNG volumes from secure supply sources from the US and Africa. 

Natural gas demand will increase in Asia. Without local resources to meet demand growth, increased imports are forecast to occur in China, Japan, India and South Korea. New LNG production from Australia is primarily destined to Asia, but utilities in the aforementioned countries are also contracting LNG supplies from US facilities.

The result of new liquefaction and re-gasification facilities is a change in worldwide supply patterns (including the need for more LNG tonnage) and LNG pricing. Supplies from the US and Canada could be tied to the Henry Hub natural gas price, and the introduction of more LNG supplies in the marketplace could result in more spot-market LNG sales.

The global LNG liquefaction industry is expected to see major restructuring from 2013 to 2020. The Europe, Middle East and Africa (EMEA) region, which includes Russia, has been the epicenter for LNG liquefaction, accounting for nearly 60% of global LNG liquefaction capacity. By 2020, its dominance will to a large extent reduce, as its share in global LNG liquefaction capacity reduces to 39.4%. The Americas region will increase its share in global liquefaction capacity from 6.4% in 2013 to 36% in 2020. The share of Asia-Pacific (APAC) will also reduce from around 33% in 2013 to around 24.5% in 2020.

The following figure compares the liquefaction capacity shares of the Americas, APAC and EMEA between 2013 and 2020.

 The high growth in the liquefaction capacity of the Americas compared with the other two regions is due to the expected start of several liquefaction terminals in the US and Canada during the 2014–2020 period. The US, a traditional LNG importer, is expected to build around 191.9 mmty (9,344.5 bcf) in liquefaction capacity by 2020. The liquefaction capacity of Canada is also expected to increase in similar terms to touch 89.8 mmty (4,373.4 bcf) by 2020. 


In terms of LNG regasification capacity, APAC is the leading region in the world due to the presence of major LNG importing countries, including Japan, South Korea, and China. The region accounts for over half of the current active LNG regasification capacity globally and will continue to be the highest regasification capacity holder by 2020 due to planned regasification capacity additions by India and China. Besides APAC, EMEA is another region which will see significant regasification capacity additions during this period, primarily due to planned regasification capacity development in several Central and Eastern European (CEE) countries. Ukraine, Poland, Estonia, Lithuania, and Croatia all plan to build LNG regasification capacities. On the other hand, the share of the Americas in the global regasification capacity will decrease from 25.2% in 2013 to 20.3% in 2020, primarily due to dwindling capacity additions in the US and Canada, which will become export oriented. Brazil, Chile, Puerto Rico, Uruguay, and Dominican Republic will witness some additions in regasification capacities. 

The following figure compares the regasification capacities of the Americas, APAC and EMEA between 2013 and 2020.


 The start of LNG exports from the US in 2016 will influence the global LNG trade and pricing; for the nature of US contracts is inherently different from conventional LNG contracts. In the US, LNG contract prices are based on Henry Hub prices. In these contracts, LNG prices are independent of crude oil prices, in contrast to the traditional long-term, oil-indexed LNG supply contracts. If this style of contract becomes more common, the flow of LNG cargos will be directed to the market with higher spot prices. Higher supply will, in turn, reduce prices, thus reducing the spot price differentials across different markets globally.