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Lower costs help boost United States LNG trade Federal report estimates 2.2 tcf of LNG imports to U.S. by 2010 Larry Persily Petroleum News Juneau Correspondent
Liquefied natural gas imports into the United States will more than quadruple by 2010, aided by falling prices for new liquefaction plants and tankers, according to a federal report.
The estimated 2.2 trillion cubic feet of LNG brought into the country in 2010 would equal about 8 percent of domestic gas consumption, exceeding the production from any single gas-producing state except Texas, said the U.S. Energy Information Administration.
“The combination of higher gas prices, lower LNG production costs, rising gas import demand, especially in North America, and the desire of gas producers to monetize their gas reserves is setting the stage for increased LNG trade in the years ahead,” said the Dec. 16 report titled, The Global Liquefied Natural Gas Market: Status & Outlook.
“Costs of liquefying, transporting and regasifying LNG have fallen significantly over the past 20 years,” with some of the biggest savings coming in lower tanker construction costs, the report said. More LNG than four largest U.S. natural gas fields combined If the projection for 2.2 tcf of imported LNG in 2010 is correct, it would exceed today’s combined natural gas production from the nation’s four most prolific fields: the Blanco/Ignacio-Blanco field across Colorado and New Mexico; the Basin field in New Mexico; the Hugoton gas area across Texas, Oklahoma and Kansas; and the Powder River basin in Wyoming.
LNG imports in 2002 totaled 229 billion cubic feet, or about 1 percent of the nation’s gas consumption, the report said. By the time the numbers are added up for 2003, the total is projected to more than double to 540 bcf, the federal agency said.
And, if the agency’s projections are right, expansion of all four existing LNG receiving terminals and construction of at least four new terminals would accommodate more than quadrupling U.S. imports to 2.2 tcf by 2010.
The report forecasts that total to double again by 2020, to more than 4 tcf per year, or more than 11 bcf per day.
A fleet of new tankers is scheduled to come online over the next several years to help move all that gas around the world. Shipyards building 55 new LNG tankers “As of late 2003, there were 151 LNG tankers in the world fleet with 55 tankers under construction,” the report said. The new ships will increase the total carrying capacity of the fleet at full load from 366 bcf in 2003 to 527 bcf by 2006, with even more ships expected later in the decade to meet the rising demand not only in the United States but around the Pacific Rim and Europe.
Meanwhile, tanker construction costs are dropping. “Building costs for LNG tankers have decreased from about $280 million (nominal) in the mid-1980s to about $155 million in late 2003,” the report said.
“The main factor driving down prices is an increase in the number of shipyards that can build LNG tankers, which enhances competition.” Competition among shipyards In addition to the eight shipyards in Japan, South Korea and Europe currently building LNG tankers, the report noted that India, China and Poland are also looking to get into the tanker construction business.
No U.S. shipyard has built an LNG tanker since 1980.
Although the federal report did not calculate savings from lower tanker costs on a per-mcf basis, Jim Jensen, a Massachusetts-based natural gas consultant with 30 years experience, offered just such a calculation for a Nigerian LNG project in an October presentation to the National Association of Petroleum Investment Analysts. The shipping cost savings between when the project was proposed in 1998 and when it was brought back for another look in 2003 added about 28 cents per mcf to the netback value of natural gas, he said. Liquefaction costs dropping, too Lower liquefaction costs over the same five years added 31 cents to the netback value of the gas, with 17 cents more in value coming from better economics of building larger plants, Jensen said.
Even without the per-mcf numbers, the federal report offers the same conclusions as Jensen. “Major economies of scale have been achieved by increasing the size of liquefaction trains,” the report said.
In the early days of LNG, the report said, the norm was liquefaction trains with an annual capacity of 50 billion to 100 billion cubic feet of gas. “Today, trains with annual capacities of 242 bcf are under construction, and a 380-bcf-per-year train is planned for Qatar.”
A recent report from Asia Pacific Energy Research Centre in Tokyo estimated liquefaction costs for a 2000 expansion of LNG production facilities at Qatar at about half the cost of Malaysia’s 1983 project at Tiga. Shipping costs also dropped by about half between the 1983 and 2000 projects, the research office said. Costs vary between facilities The Energy Information Administration report acknowledges that costs vary widely, depending on whether it is a new project or expansion of existing facilities.
In addition to anticipating expansion of all four existing U.S. LNG import terminals by 2006, the report said at least four new terminals will open by 2010, although it did not go so far as to predict the exact location of each new plant.
The report also provided a breakdown of price components in an LNG project:
• Gas production, from the reservoir to the liquefaction plant; 15 to 20 percent of total costs.
• Liquefaction, storage and loading; 30 to 45 percent.
• Shipping; 10 to 30 percent, mostly depending on distance. (For example, it is about 2,500 miles from Venezuela to the gulf coast of Texas vs. 13,000 miles from Qatar to Texas.)
• Receiving terminal costs and regasification; 15 to 25 percent.
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