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Liquefied Natural Gas – Powering the Future – A US$106 Billion Market 2008–2012
Figure 1: Capital Expenditure on New Liquified Natural Gas Facilities
35
Liquefaction terminals
30
LNG carriers
25
Import terminals
20
15
Expenditure (US$ billions)
10
5
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: The World LNG Market Report 2008–2012 by Douglas-Westwood Ltd.
quantities of gas that are flared and reduce the negative The outcome of our research and market modelling shows that
environment impact of gas flaring – mainly the massive amounts of project delays will create an expenditure profile that has significant
carbon dioxide that it produces. year-on-year peaks and troughs, particularly since we allocate
project expenditure to the year of start-up. However, the overall
Technological Advances conclusion is that LNG remains a growth market and expenditure
Advances in liquefaction technology have enabled the development levels continue to follow an upward trend.
of larger liquefaction trains, creating larger economies of scale and
thus compensating somewhat for rising capital expenditure (CAPEX) Asia has the largest proportion of global LNG expenditure. Over the
requirements and sustaining the economic viability of LNG as a forecast period, the region accounts for 43% of the US$106.8 billion
solution for bringing gas to the market. of our global forecast. The Middle Eastern region is the next most
significant, and together the top two regions account for 58% of
Engineering, Procurement and Construction Costs total expenditure. Meanwhile, the limits of domestic gas production
Escalating costs of labour and raw materials and the tight contractor in North America and Western Europe are becoming clear and gas
market have led to large increases in the cost of new engineering, import demands are rising. Increasingly, LNG is the method of choice
procurement and construction (EPC) contracts. By 2012, many in satisfying growing gas demand in these regions. Following the
projects coming onstream will have cost over US$500 per ton of success of the terminals established in Nigeria and Trinidad and
annual capacity. Tobago, the wave of new projects that has emerged demonstrate a
potential for serious market growth over the next five years.
Prospects
Figure 1 shows CAPEX on new LNG facilities by type, giving the In the World LNG Market Report 2008–2012, Douglas-Westwood
historical and forecast spend. There is no doubt that the LNG market is Ltd has segmented the projected CAPEX for liquefaction terminals
set to see dramatic growth over the forecast period, with annual and import terminals into the main expenditure items. For
expenditure set to reach US$29.5 billion by 2012. However, in 2010
and 2011 we are set to witness a dip in expenditure due to terminal
start-up delays and a reduction in vessel orders. CAPEX on LNG facilities Liquefaction terminals and
for 2008–2012 will total over US$106 billion – a growth of 141%
import terminals account for the
relative to 2003–2007.
largest share of the historical
Liquefaction terminals and import terminals account for the largest
and forecast spends,
share of the historic and forecast spends, each representing 38 and
33%, respectively. A major trend within the liquefaction terminals
each representing 38 and
segment is the continuing move towards larger process trains. The
33%, respectively.
largest train size over the 2003–2007 period was 5.2mmtpa. For
the forecast period, the largest train size is 7.8mmtpa. Import terminals
will see a rapid growth in expenditure, from US$5.8 billion in liquefaction terminals, the construction services sector accounts for
2003–2007 to almost US$35.4 billion in 2008–2012, a growth of the biggest percentage of total CAPEX (24%) and is forecast to grow
512%. Cost increases and political concerns have hit the LNG industry from US$1 billion in 2007 to just under US$3.8 billion in 2012. LNG
and will influence near-term investment. However, overall CAPEX is set storage tanks and engineering and procurement services are the
to reach new highs over the 2008–2012 period. A total of US$106 next largest sectors within this segment, and are expected to
billion is projected to be spent on export terminals, LNG carriers and collectively account for over US$10.9 billion in the 2008–2012
import terminals over the next five years. period, or 27% of total CAPEX. ■
EXPLORATION & PRODUCTION – OIL & GAS REVIEW 2008 – VOLUME 6 ISSUE II
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