Australian LNG Projects

This figure shows Australia’s LNG projects. Currently, Australia has seven operating LNG projects and three under construction. Other projects are also being considered.

Australia’s largest project is Gorgon, developed by Chevron, ExxonMobil, and Shell. The Greater Gorgon area field has more than 35 trillion cubic feet (Tcf) of resources. Gorgon’s project capacity is 15 million tons per annum (MTPA). Project cost is 54 billion Australian dollars (B AUD). Gorgon shipped its first cargo in March 2016.

Another large Australian project is Wheatstone, with a capacity of 8.9 MTPA and budget of 34B AUD. Both Gorgon and Wheatstone include domestic gas plants. The majority of Australian LNG projects are supported by long-term contracts.

Figure Source: The Australian Petroleum Production & Exploration Association (APPEA)

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Russian LNG Supply

Russia has two LNG projects: Sakhalin 2 and Yamal. The Sakhalin 2 LNG project commenced operation in 2009. The project operator is Sakhalin Energy (Gazprom 50%, Shell 27.5%, Mitsui 12.5%, and Mitsubishi 10%). Sakhalin 2 LNG is part of a large project that includes oil and associated gas production from two Pultun-Astozhskoe offshore platforms plus gas and NGL from the Lunskoe Platform. All platforms are located in the northern region of the island of Sakhalin, while the LNG plant is located in the southern region, connected to production facilities by pipeline.

The Yamal LNG project includes three trains, which are expected to commence production from 2017 to 2019. The Yamal LNG project is owned by Novatek (50.1%), Total (20%), CNPC (20%), and Silk Road Find (9.9%). The majority of gas (86%) will be shipped to the Asia/Pacific region (mostly China) through the Bering Strait in summer and the Suez Canal in winter. Special LNG tankers will be required to operate in icy conditions without icebreakers. The remaining volume of gas will be shipped to Europe. The gas will come from the Yuzhoe-Tambeyskoe gas field located near the LNG plant in the port of Sabetta. This gas field has conventional gas developed by very productive vertical wells, which significantly reduces the cost of development.

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DOE L48 Non-FTA LNG Export Licenses

This figure shows US LNG projects. In the US, six facilities are under construction: Sabine Pass Trains 1–4, Freeport, Cameron, Cove Point, Elba Island, and Corpus Christi. Most of these volumes have firm offtake agreements.

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LNG Premiums to Asia & Europe

This figure shows the 2025 full-cycle costs of delivering LNG to Asia and Europe from both Canadian and US projects. The arbitrage opportunity that existed between North American and Asian markets when the price of oil was at 100 USD/bbl was one of the key drivers behind the large number of proposed LNG export projects in both the US and Canada (the Asia gas price is 85% of the Japan Crude Cocktail (JCC) oil price). With the sharp drop in oil prices since the end of 2014, many of the proposed US and Canadian projects are challenged below an oil price of 70 USD/bbl on a full-cycle cost basis, although the arbitrage opportunity remains positive when competing directly with JCC on a Btu basis.

Gas supply for the East Coast projects is unlikely to be initially sourced from Nova Scotia and New Brunswick due to declining Sable Island production and existing (or anticipated) hydraulic fracturing moratoria. Eastern Canadian projects will need to source their gas from the US NE region (Marcellus/Utica) or Western Canada, both of which carry high pipeline costs. Shipping distances to Europe and India are shorter from the Canadian East Coast than from the Gulf of Mexico or Canadian West Coast.

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Asian LNG Imports

This chart shows historical demand through August 2017 and Solomon’s projection of growth to 2025 for six main Asian regions. Except for the slight downturn in 2015, LNG demand has been growing steadily. This growth was led by Japan and China.

A number of factors could impact the forecast for Asian demand for LNG, including the following:

  • Japanese LNG demand could decline if nuclear power plants are brought back online.
  • The pace and direction of Asia’s economic growth will have a direct impact on LNG demand requirements; high energy costs, including high costs for LNG, can limit economic growth.
  • Growth of shale gas and/or renewable power generation to meet global emission reductions in China, and possibly other countries in the region, could reduce LNG demand growth.
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Global Liquefaction Plants* & Major LNG Shipping Routes

This figure shows the location of major liquefaction facilities and LNG shipping routes worldwide. The varying dot sizes on the map indicate the facilities’ capacities. LNG is coming to European and East Asian markets primarily from the Middle East, Indonesia, Malaysia, Australia, and, recently, the United States.

Not all facilities are operating at capacity due to declining gas production, operational issues, and other factors.

*Approximate Locations (as of January 2017)

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Liquefaction Capacity per Country

This chart shows liquefaction capacity per country to 2020. Projects that are under construction or are planning to start LNG production after 2020 are not shown. By 2020, Australia will become the world’s largest LNG producer, with a capacity of around 85 million tonnes per annum (MTPA)—surpassing Qatar.

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Closing North American LNG Arbitrage

This chart shows North American LNG Arbitrage history and forecast.

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LNG Contract Expiries

This chart illustrates the volume in billions of cubic feet per day of long-term contracted LNG that is set to expire and is up for renewal. By 2026, one-third of current global demand will have expired and will need to be renewed.

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Global LNG Supply & Demand

Based on liquefaction additions currently under construction (estimated at 85% load factor) and announced projects (risked at 50% success rate and an 85% load factor), Solomon forecasts that global liquefaction capacity could grow to more than double that of 2016. Solomon expects a considerable number of projects to be delayed or cancelled. The chart illustrates existing, under construction, and proposed global LNG liquefaction capacity far outpacing projected demand by 2025.

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