LNG construction pace 'must be stepped up'

Step up: LNG construction need to speed up if demand is to be met

The rate of construction of liquefied natural gas projects will need to be quickly stepped up if forecast demand is to be met, according to an industry specialist.

"Over the next 10 years we estimate that we need to build new LNG projects at a rate of more than six times the rate that we saw in the 1990s and almost twice the rate that we saw in the 2000s," said ExxonMobil Gas & Power Marketing vice-president Peter Clarke said at the World Petroleum Congress in Moscow on Monday.

There is currently about 80 million tonnes per annum of new liquefaction capacity under construction around the world.

"So with so many LNG projects out there being proposed to be built and with the limited capacity of the industry to actually build these, we think project costs are unlikely to go down," he said.

It is estimated that the 80 mtpa worth of projects under construction today will cost on average $20 billion each, including the upstream components and liquefaction.

"That's four times more expensive than an average project built in the period 2000 to 2010, so I think it's fairly clear that not all LNG projects or proposals will succeed," Clarke said.

Regional gas markets are becoming connected by LNG. Although this transition will take time, the pace of change is likely to be different in different regions around the world, he told conference attendees.

According to Clarke, questions that will affect the pace of change include: "Do we have enabling legislation and regulation? Do we have access to interconnected infrastructure? Do we have common gas quality standards? Do we have a sufficient number of buyers and sellers?"

He added that overlying those issues was the "stark reality" that the natural gas business is a very costly one.

Clarke said gas is about four times more expensive to transport than oil, especially when shipped as LNG or delivered by a long pipeline.

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