World’s biggest LNG conference bounces back
Rising costs, Asia’s burgeoning demand and the prospects for US exports dominated the LNG17 conference in Houston. And there wasn’t a volcanic ash cloud in sight
The 17th International Conference and Exhibition on Liquefied Natural Gas (LNG17) – the world’s largest global LNG event – is over.
Around 5,000 delegates from 80 countries passed through the doors of the George R Brown Convention Center in Houston to hear from over 300 speakers on issues driving the LNG industry. Speakers included government ministers, industry analysts and executives from the world’s leading LNG buyers and suppliers.
The liquefied natural gas (LNG) sector is going through a boom period (see our special survey this month), and the conference reflected this. Thousands of people travelled to the four-day event and crowded into a series of keynote speeches, workshops, press conferences, seminars and parties.
Texan hospitality ensured everything was larger than life, from the Tex-Mex food on offer to the exhibitions. Cowboy-boot manufacturers, rodeos, models of floating LNG facilities and even a life size gas-powered truck were on display in the convention centre.
This series of LNG conferences began in Chicago in 1968, just a few years after Algeria became the world’s first major LNG producer. Since then, the jamboree has taken place every three years, alternating the location between LNG buyer and seller countries.
Jay Copan, executive director of LNG17, said the conference had “set a new standard” in terms of the number of people attending and the quality of discussions.
This year’s conference was certainly a world apart from the previous event, LNG16 in Oran, Algeria, which took place in 2010. LNG16 didn’t get off to a good start as a freak Icelandic ash cloud grounded hundreds of flights across Europe.
The event organisers had to delay the conference as thousands of delegates were stranded in European cities. The eruption of Eyjafjallajökull , and the cloud of ash that streamed over European skies, stranded all but the hardiest of international travellers.
The 5000-strong delegate list at LNG17 was up from 3,000 at the 2010 event. There was also a 40% year-on-year increase in exhibition spaces sold this year, totalling 13,500.
When Houston was awarded the host role for this year’s event the US was firmly established as an LNG importing nation. But with the rise of domestic natural gas production in the US, bolstered by soaring shale-gas output, the potential for US LNG exports was on everyone’s lips last month.
So far the US Department of Energy (DOE) has granted just one export licence to a non-free-trade-agreement country. But another 20 or so are in the application queue. US independent Cheniere Energy signed a 20-year LNG supply deal with Centrica in March.
Things have changed so quickly that Wood Mackenzie, a consultancy, reckons the next wave of Qatari-sourced LNG may in fact come from North America, not from the tiny Mideast nation that has been the sector’s powerhouse in recent years. Now, its investments in new liquefaction capacity in the US may provide Qatar with greater commercial and political value than investments in new capacity back home. Qatar Petroleum International (QPI), along with its partner ExxonMobil, is considering a re-vamp of its Golden Pass regasification terminal, along the US Gulf Coast, as a liquefaction project.
If this goes ahead, LNG from Golden Pass could be sent to the UK, allowing Qatari LNG to be re-directed to Asian markets, Wood Mackenzie said. This could significantly lower development costs. It could also provide Europe with gas priced $1.50 per million British thermal units cheaper than other US-export projects.
But the Golden Pass facility has not yet received approval from the DOE.
QPI has also teamed up with Centrica to buy C$1bn ($980m) worth of Suncor’s conventional natural gas and crude-oil assets.
Money, money, money
Rising costs for LNG projects were also on the agenda. Shigeru Muraki, executive vice president of Tokyo Gas, told LNG17 delegates that cost blowouts were “the biggest threat to any LNG project”.
Soaring costs for LNG projects have long been an issue for the industry, especially in Australia. Several high-profile projects, including Woodside’s 12m tonnes per year (t/y) Browse facility in Western Australia have been especially exposed to the trend. Expensive labour, critical to big projects that will increase capacity, and the strong Australian dollar have all made labour and construction more expensive.
But LNGers worried about such things need only look at Asia, which will increasingly dominate global demand. Appropriately enough, Beijing will play host to LNG19 in 2019.
Asian buyers at the next one will have another platform to call for changes in the way LNG is priced. That was a theme in Houston, too. Yuji Kakimi, senior director of Japan's Chubu Electric Power, told the conference that the LNG market in Asia must be made more liquid and that hub-based pricing should be introduced.
Global LNG demand is expected to double by 2025 to reach 400m t/y. Asian consumption will drive growth in the sector with Japan, India and China’s demand all set to soar.
Japanese LNG demand was 87m tonnes last year, up from 65m tonnes in 2009. The country's imports have soared since it idled its nuclear power-generation capacity after the Fukushima power plant disaster in 2011.
India is also emerging as one of the world’s gas-hungry nations. A huge demand-supply gap is expected to open up in India over the next decade, and its demand is expected to double between now and 2025. Alas, there there will be “no dramatic change in domestic production”, Petronet LNG’s chief executive, A K Balyan, told the conference.
That should be reassuring news for exporters the world over. The sector is entering a new growth phase. LNG18, to be held in Perth in 2016, may be even bigger than last month’s party in Houston.