Wednesday, April 8, 2015

O&G Investors Predict Cancellation of Most Proposed U.S. LNG Export Terminal Projects Due to Low LNG Prices

There are two extremely important - and very revealing points this article brings out.

1) "Greenfield projects on undeveloped property are much more expensive, involve more construction risk, and take longer to build than brownfield projects, which re-purpose existing LNG re-gasification sites. Greenfield projects are also frequently challenged by local opposition and occasionally by untested laws and regulations." 

*Meaning: local grassroots resistance is having an impact

 2) "China will be the biggest variable and most important driver of global LNG in that time frame. India will see rapid growth, but not be as big of a player as China. Other more mature LNG markets in Japan, South Korea and Europe, which represent the bulk of demand, will have flat growth". 

*Meaning: "US energy independence and lower consumer energy costs" where never the real end goals. - JT

Moody's Predicts Cancellation of Most Proposed U.S. LNG Export Terminal Projects Due to Low LNG Prices

Posted by Sutherland LNG on Apr 7, 2015 in Liquefaction, LNG Exports, Markets and Competition | 0 comments

Moody's Investor Service has released a new report "Lower Oil Prices Cause Suppliers of Liquefied Natural Gas to Nix Projects," which predicts that low LNG prices will result in the cancellation of most of the gas liquefaction and export terminal projects currently proposed in the United States and Canada.  The report also predicts that such projects "already under construction [worldwide] will continue as planned, which will lead to excess liquefaction capacity over the rest of this decade."  Read more in the press release.


 
 
 
 Announcement: 

Moody's: Liquefied natural gas projects nixed amid lower oil prices

  The document has been translated in other languages
 
 
 
Global Credit Research - 07 Apr 2015
 

New York, April 07, 2015 -- Liquefied natural gas (LNG) suppliers are curtailing their capital budgets, amid low oil prices and a coming glut of new LNG supply from Australia and the US, Moody's Investors Service says in a new report, "Lower Oil Prices Cause Suppliers of Liquefied Natural Gas to Nix Projects."
Moody's says low LNG prices will result in the cancellation of the vast majority of the nearly 30 liquefaction projects currently proposed in the US, 18 in western Canada, and four in eastern Canada.
"The drop in international oil prices relative to US natural gas prices has wiped out the price advantage US LNG projects, reversing the wide differentials of the past four years that led Asian buyers to demand more Henry Hub-linked contracts for their LNG portfolios," says Moody's Senior Vice President Mihoko Manabe.
However, projects already under construction will continue as planned, which will lead to excess liquefaction capacity over the rest of this decade. Notably, through 2017, Australia will see new capacity come online from roughly $180 billion in investments, which will result in a 25% increase in global liquefaction capacity. Likewise, the US is poised to become a net LNG exporter after the Sabine Pass Liquefaction LLC (Ba3 stable) project goes into service in the fourth quarter of 2015.
Moody's expects Cheniere Energy's Corpus Christi project will be the likeliest project to move forward this year, since it is among the very few projects in advanced development that have secured sufficient commercial or financial backing to begin construction.
Lower oil prices will result in the deferral or cancellation of most other projects, especially this year. While some companies like Exxon Mobil Corp. (Aaa stable) can afford to be patient and wait several years until markets are more favorable, most other LNG sponsors have far less financial wherewithal, and some may be more eager to capitalize on the billions of dollars of upfront investments they have made already, sooner rather than later.
 Greenfield projects on undeveloped property are much more expensive, involve more construction risk, and take longer to build than brownfield projects, which re-purpose existing LNG regasification sites. Greenfield projects are also frequently challenged by local opposition and occasionally by untested laws and regulations. Based on the public estimates of companies building new LNG liquefaction capacity, the median cost to build a US brownfield project is roughly $800 per ton of capacity, compared with the more advanced Australian greenfield projects, now estimated at around $3,400 per ton.
Through the end of the decade, Moody's expects LNG demand will grow more slowly versus supply. China will be the biggest variable and most important driver of global LNG in that timeframe. India will see rapid growth, but not be as big of a player as China. Other more mature LNG markets in Japan, South Korea and Europe, which represent the bulk of demand, will have flat growth. 
The report is available to Moody's subscribers at URL:

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