The level of planned and proposed facilities for natural gas liquefaction – the process of cooling natural gas into liquid form to make it transportable for export – far exceeds projected global demand. And the window for the U.S. is closing rapidly – some of the planned capacity outside of the U.S. already is under construction. Further, LNG export facilities cost billions of dollars and take several years to build. To capture this economic opportunity we must act quickly.
Demand for natural gas around the world is growing in every region. And world production will increase to meet this demand. World LNG trade is expected to more than double by 2040, and most of this increase in liquefaction capacity occurs in North America and Australia. The U.S. Energy Information Agency (EIA), in its 2016 reference case, predicts total LNG exports from the U.S to rise to more than 12 billion cubic feet per day (Bcf/d) by 2025.
The chart above shows that current world LNG liquefaction capacity, plus capacity already under construction in the U.S. and other parts of the world, are insufficient to meet the anticipated 80 Bcf/d of global LNG demand in 2040. To meet that 2040 demand, we will need more projects than just those now under construction. Yet, with the proposed projects in the U.S. and around the world exceeding forecasted demand by about 100 Bcf/d, early movers in adding liquefaction capacity will have the advantage in capturing this limited market.
The first shipment of U.S. LNG from the lower 48 states left in February 2016 from Cheniere Energy’s Sabine Pass Liquefaction Project, and since then the U.S. has shipped LNG to Europe, Asia and South America. There are six terminals currently under construction that are expected to come online by 2020. The sooner these facilities are up and running the better chance the U.S. will have to capture this growing demand market. Further, completion of the expansion of the Panama Canal will help to make LNG from the U.S. more marketable. The enlarged canal can handle the vast majority of the world’s LNG tankers while significantly shortening travel time and helping to reduce transportation costs for U.S. LNG suppliers to key overseas markets.