A proposed boom in new LNG import and export terminals is increasingly going bust, according to a new survey and report by Global Energy Monitor. Coming on the heels of the IEA’s recent call for a halt to new gas, oil, and coal investments, the report finds that more than one-third of proposed new global LNG terminal capacity is facing financing and project delays.
The report, “Nervous Money: Global LNG Terminals Update 2021,” includes the following highlights:
- Worldwide, at least 26 LNG export terminals totaling 265 million tonnes per annum (MPTA) of capacity report final investment decision (FID) delays or other serious disruption—38% of the 700 MTPA of export capacity under development worldwide. In the US, at least 10 LNG export terminals totaling 123 MPTA of capacity report FID delays or other serious disruption—39% of the 314 MTPA under development.
- Total’s declaration of force majeure for the Mozambique LNG Terminal, following an attack by insurgents, has highlighted the vulnerability of terminals priced in the tens of billions of dollars.
- The cost overruns, scheduling delays, and high outage rate that plagued the LNG sector were further exacerbated in the past year by Covid-related workforce disruption.
- Once regarded as a potential climate solution, the LNG sector is increasingly seen as a climate problem, particularly for European buyers. According to the IEA, inter-regional LNG trade would need to decline rapidly after 2025 under a 2050 net zero scenario.
- Globally, only one LNG export project has reached FID in the past year, Costa Azul LNG terminal in Mexico.
- North America accounts for 64% of the global export capacity in construction or pre-construction. North America also has the most troubled projects, with 11 of the 26 LNG export terminals reporting FID delays or other serious disruption.
- Aggressive expansion of capacity in low-production-cost Qatar and the Russian Arctic has increased risks to U.S. LNG export developers.
- Despite the rise in delays in development of LNG export capacity, global LNG import capacity continues on an aggressive expansion path, with enough projects in construction or pre-construction to increase global capacity by 70%. Of the capacity in construction or pre-construction, 32% is in China, 11% is in India, and 7% is in Thailand. Outside Asia, Brazil is a hotspot with 13 LNG import terminals in construction or pre-construction.
“LNG was sold to policymakers and to investors as a safe, clean, secure bet,” said Lydia Plante, lead author of the report. “Now all those attributes have turned into liabilities. The sheer size of the projects has exposed investors to catastrophic losses. And the recent IEA 2050 scenarios show that LNG has no place in a climate-safe energy future. The industry has lost its climate halo, and the only question is whether the Biden Administration will waste precious political capital propping up potential white elephant projects.”
“Those who are accustomed to thinking of infrastructure as a ‘safe’ investment may be in for a rocky ride with LNG terminals,” said Ted Nace, Executive Director of Global Energy Monitor. “The opportunity has narrowed for more export capacity to be built, and North American projects have fallen behind for several reasons. They’re rightly seen, especially by European buyers, as particularly dirty, due to their reliance on fracked gas. In addition, Qatar and Russia both have access to cheaper gas, and they’re not about to relinquish market share.”
Read the report here.
Image: photographic services, Shell International Limited.