By - Jim Vess

LNG global building boom faces risk from renewable energy, climate policies, report says

Energize Weekly, July 10, 2019

The natural gas industry is making $1.3 trillion in infrastructure investments to create a global liquefied natural gas (LNG) market but those capital expenditures may be at risk from competitive renewable energy prices and the prospect of climate regulations, according to Global Energy Monitor.

The San Francisco-based nonprofit, which tracks worldwide fossil-fuel infrastructure, said that the investments could transform the sector in its report The New Gas Boom.

“Through a massive increase in portside infrastructure, floating offshore terminals, and oceangoing LNG vessels, the natural gas industry is seeking to restructure itself from a collection of regional markets into a wider and more integrated global system,” the report said.

The risk is that natural gas could be out-competed by renewable generation, which is already cheaper in many parts of the world, and be hit with tougher efforts to curb manmade greenhouse gas linked to climate change, the report said.

At least 202 LNG terminal projects — 116 export terminals and 86 import facilities — are in some stage of development around the world.

The LNG export terminals developments are in 20 countries, with Canada and the U.S. accounting for 74 percent of proposed new capacity and 70 percent of the investment dollars. If built, LNG terminals, including those in pre-construction and construction would increase current global export capacity threefold.

The import terminals are slated for 42 countries, including 22 with no current LNG import facilities. The expansion is centered in the Asia-Pacific region. The Asia-Pacific import terminals make up about 6 percent of the total $1.3 trillion in investment, according to Global Energy Monitor.

In terms of total capital outlays for both import and export projects, the U.S. accounts for $507 billion in investments followed by Canada at $410 billion, Russia at $86 billion, Australia at $38 billion, Tanzania at $25 billion and China and Indonesia both with $24 billion in LNG investments. Iran also has a slate of $21 billion in LNG projects.

About 432 billion cubic meters of LNG was produced in 2018 with four countries accounting for nearly 63 percent of the imports.

The top importers were Japan with 28.9 percent of the market, China with 13.5 percent, South Korea with a 13.2 percent of the imports and India with 7.1 percent.

The Global Monitor report points to two significant risks to the large-scale development of LNG infrastructure and trade.

The first threat is the potential for renewable generation, particularly photovoltaic solar and wind, to undercut prices for electricity generation, one of the big customers for natural gas.

A study of comparative generating costs by the financial consulting firm Lazard Ltd. Lazard calculated the cost by adding up all the construction, operation and fuel expenditures and dividing that by the toal amount of electricity generated by the plant to give a cost per megawatt-hour.

Lazard puts the range for unsubsidized new utility-scale photovoltaic installations at $40 to $46 a megawatt-hour. Wind was $29 to $56 a megawatt-hour.

By comparison, a new unsubsidized gas peaking plant would cost $152 to $206 a megawatt-hour and nuclear plant $112 to $189 a megawatt-hour.

In addition to the cost question, Global Energy Monitor said that efforts to curb greenhouses gas will also but natural gas emissions, primarily methane, in the crosshairs of potential regulation.

“In its most recent reports, the IPCC [the United National Intergovernmental Panel on Climate Change] called for near-term reduction in natural gas production of 15 percent by 2030 and 43 percent by 2050, relative to 2020,” the report said. “Such reductions are not compatible with expansion of the current natural gas system, including the building of new LNG capacity.”

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