World LNG Market Forecast 2016-2020 Leaflet + Contents

World LNG Market Forecast 2016-2020energy business insight

e: [email protected] t: +44 (0)203 4799 505

www.douglas-westwood.com

Aberdeen | Faversham | Houston | London | Singapore

© 2015 Douglas-Westwood

24

World LNG Market Forecast 2016-2020

By purchasing this document, your organisation agrees that it will not copy or allow to be copied in part or whole or otherwise circulated in any form any of the contents without the written permission of Douglas-Westwood

LNG is formed when natural gas is cooled

to around -161°C (-258° F) at atmospheric

pressure. This process reduces gas to

1/600th of its original volume, making it

commercially viable for sea transportation

to distant markets. Strong gas demand

coupled with large exploitable stranded gas

reserves have led to significant interest and

investment in gas liquefaction.LNG consists primarily of methane, with

some nitrogen, ethane, propane and butane.

LNG is a clean hydrocarbon fuel as its com-

bustion is environmentally friendlier than

other fossil fuels. As a liquid, LNG is lighter

than water, with a density of between 430

to 520 kg/m3.

Gas Production and Transportation to

Liquefaction Terminal – depending on the

pressure in the reservoir, gas may either

be in solution, or separate from the oil in a

geological formation known as a ‘gas cap’.

Associated gas occurs in conjunction with

crude oil. Feed-gas for LNG terminals is

sourced via pipelines from either onshore

or offshore production facilities.Liquefaction – natural gas will undergo

pre-treatment processes, removing any con-

taminants that can freeze and damage the

liquefaction equipment. A cycle using one

or more refrigerants circulating through a

heat exchanger, compressor and expansion

valve cools the gas into liquid form.

Storage and Loading – following liquefac-

tion, LNG is then moved into storage tanks,

ready to be loaded onto LNG carriers.Shipping – LNG cannot be shipped in

standard containment systems as the tem-

perature will shatter steel; therefore steel

alloys are employed containing 9% nickel,

complemented with numerous insulating

materials.

Unloading – carriers will be secured to the

dock or jetty of an LNG terminal where

they will connect to several unloading arms,

as well as a gas return arm. LNG is then

transported through insulated pipes to the

terminal’s storage tanks. Regasification – LNG will go through a

phase transition with the use of vaporisers.

LNG passes through a set of tubes and is

heated by either gas burners, seawater, or a

combination of these processes.

One of the main uses of LNG is for power

generation. Since gas produces at least a

third less carbon dioxide (the main green-

house gas) than coal or oil for every unit of

energy generated, there is a growing use of

gas for power generation and the substitu-

tion of gas for other fuels enables emission

targets to be met more easily.LNG is used as a way of sourcing gas for

heating purposes in both residential and

commercial properties.

Natural gas is also used to make ethane for

the petrochemicals industry and ammonia

(an agricultural fertiliser), amongst other

products.

LNG as a fuel for transportation is a major

growth area. Its presence is growing in

importance as an alternative for ferries and

support vessels; there is also much research

identifying the applications for larger vessels

such as container ships.

Figure 28: Process Diagram of the LNG chain

Production

LiquefactionTransportation

RegasificationConsumption

OnshoreReservesOnshoreProductionPlatform

OnshoreTerminal

OnshoreTerminal

OffshoreProductionPlatform

OffshoreReserves

LNG FPSO

Floating Storage & Regasification UnitRegasification Vessel

LNG Carrier

DistributionPipelines PowerGeneration

Industry

Commercial

Residential

Transportation

Gas

LNG

ONSHOREOFFSHORE

The LNG Chain

Chapter 3 : The LNG Industry

• Prospects• Technologies• Markets


28



LNG PricingChapter 3 : The LNG Industry

Global LNG gas prices have been influ-

enced by fluctuations in weather and

demand, competition with substitute

fuels and unexpected events, such as

the ongoing gas disruption from Rus-

sia and the 2011 Fukushima reactor

meltdown.

The lack of a universal gas price has

led to two dominant pricing strategies.

However, regulated and subsidised

price mechanisms are employed in

regions such as the Middle East and

North Africa.

Increased shale production in the

US has led to the lowest average

global gas prices. Japan is trying to

move away from oil-linked contracts

towards Henry-Hub linked prices. In

addition, it plans to introduce LNG

Futures market in 2015.Asian demand

is falling, driving a decrease in price.

USA

$2.68 per mmBtu

*This is an average of Cove Point, Cana-

port and Lake Charles LNG prices.

LNG prices will remain the lowest

and are prone to fluctuation in the

coming years.

The USA is set to become a net ex-

porter of natural gas by 2017, driven

by LNG exports.

Argentinag

$7.62 per mmBtu

Argentina was forced to import

LNG at higher global prices with

increasing demand.

Imports of LNG hit a record high in

July 2015, ahead of peak winter de-

mand season due to rising demand

for energy in Argentina.

Spainp

$6.55 per mmBtu

Spain has Europe’s largest LNG

import capacity.

In recent times, the country has

increased its re-export cargoes due

to falling domestic demand and the

shift towards use of hydroelectric

power.

India

$7.20 per mmBtu

LNG competes with lower prices

of alternative energy sources as well

as India’s energy policy of focusing

on developing nuclear, solar and

wind energy.

Coal and crude oil form the majority

of primary energy consumption.

JapanJ p

$7.25 per mmBtu

Japan prices LNG against the JCC

pricing on an oil parity basis.

Falling LNG prices are a conse-

quence of Japan’s efforts in reducing

high energy import costs by using

coal in place of expensive oil and

LNG.

World LNG Pricingg

Different Universal Gas Price-Pricing Mechanisms

Formula-based pricing – this method involves a negotiation of a formula between the buyer and the seller, to link

the price of natural gas to competing fuels such as crude oil or oil products. This is employed in markets/countries

where there is little or no gas trading to enable a transparent gas price to develop, e.g. in Asia and Southern Europe.

Market-based pricing – is a method used in markets/countries where sufficient volumes of gas are traded and a clear

and transparent market price for gas is established, e.g. Henry Hub in North America and NBP in UK.

UK

$6.41 per mmBtu

In 2015, LNG terminals are feeding

62 million cubic metres of gas a day

into the UK energy network, double

the 12-month average.

UK’s increasing demand for LNG

could result in it being exposed to

Asian LNG prices and longer-term

contracts.

China

$7.10 per mmBtu

The China-Russia gas deal has

helped give China some supply

security.

Slower economic growth and poor

domestic pricing dynamics have un-

dermined the profitability of Chinese

LNG imports in 2015.

South Korea

$7.25 per mmBtu

South Korea price LNG on an oil

parity basis.

Weak economic growth, reduced

manufacturing output and healthy

LNG stock levels have lead to a

decrease in LNG demand. Further-

more, an increase in nuclear capacity

has contributed to the drop in gas

consumption for power generation

in South Korea.

Figure 32: World LNG Estimated Prices

Source: FERC, Waterborne Energy (September 2015)


50



LNG Vessel Owners & Analysis

Chapter 6 : LNG Transportation

LNG carrier capacities The majority of LNG carriers are small

conventional carriers (53% of operational

fleet) with capacity in the range of 90,000-

149,999m3. Large conventional carriers in

the range of 150,000-179,999m3 represent

the next largest group. The case for smaller

LNG carriers is in addressing smaller gas

importers without access to a pipeline grid,

helping with the redistribution of LNG and

it could be related to meeting design re-

quirements for partial filling. In many cases,

it also makes economic sense.

In recent years, however, vessel sizes seem

to have trended towards the large conven-

tional carriers (150,000-179,999m3), which

make up 93% of the current orderbook.

In contrast, small conventionals represent

only 7% (Figure 56). The trend towards

larger LNG carriers can be explained by

the increasing demand for larger quanti-

ties of LNG. In addition, the widening of

the Panama canal, which is expected to be

operational by 2016 will provide further

incentive for ship-owners to utilise larger

carriers. Many of these vessels on order are

owned by Bonny Gas Transport, China LNG

Ship Management and Mitsui OSK Lines.

There are approximately 95 ship-owners in

the market currently. Of these ship-owners,

79% own fewer than five vessels, while only

8% have over ten vessels. The largest fleet of LNG carriers are cur-

rently owned by QGTC, M.I.S.C, Golar

LNG, Teekay LNG, Bonny Gas Transport,

BW Gas, BG International (pending the

acquisition by Shell), J4 Consortium, Maran

Gas Maritime and K Line. Of these major

ship-owners, QGTC has one of the highest

fleet capacities and one of the youngest

fleets.

The current orderbook has 169 units. Of

these orders, Maran Gas Maritime, Mitsui

OSK Line (MOL), Teekay LNG, Bonny Gas

Transport, BP Shipping and China Energy

Ship Management have the highest number;

about 40% of total orders. These orders

could change the buyers into major ship-

owners. Maran Gas currently has nine op-

erational vessels – with its 20 new orders, it

would have 29 vessels by the end of 2020.

Until these are delivered, only QGTC and

MISC have a fleet size above 20.Qatar Gas Transport Company (QGTC),

known as ‘Nakilat’ operates the largest LNG

carrier fleet in the world. QGTC’s fleet

experienced significant growth between

2008-2010, with 21 vessels delivered. These

carriers were ordered for shipping Qatari

LNG.

Malaysia International Shipping Corpora-

tion Berhad (M.I.S.C) is a subsidiary of

Malaysia’s Petronas, and currently has 24

operational LNG carriers. The company

is involved in owning and operating tank

terminals, maritime education and in the

offshore construction, conversion and

marine repair services sectors.

Figure 56: LNG Carrier Fleet by Class

Figure 57: Vessel Owners & Fleet Specifications

Large Conventional30%

Q-Flex8%

Q-Max3%

Small6%

Small Conventional53%

Large Conventional93%

Small7%

Class

Capacity (m3)

Small

10,000 - 89,999

Small Conventional

90,000 - 149,999

Large Conventional

150,000 - 179,999

Q-Flex

180,000 - 219,999

Q-Max

220,000 - 259,999

2524

20

16

14 14

12 12

9 9 98 8 8 8

7 7 76

5 5

3

14

6

3

20

5

26

6

2 2

16

0

10

20

30

QG

TC

M.I.S.

C.

Gol

ar L

NG

Tee

kay

LNG

Bonn

y G

as T

rans

port

BW G

asBG

Inte

rnat

iona

lJ4

Con

sort

ium

Mar

an G

as M

ariti

me

Gas

Log

K Li

neJ5

Con

sort

ium

Mal

t LN

G T

rans

port

MO

L/LN

G Ja

pan

Nat

iona

l Gas

Shi

ppin

gBP

Shi

ppin

gA

ustr

alia

LN

GJ3

Con

sort

ium

Chi

na L

NG

Shi

pM

gmt.

Dyn

agas

Sten

a Bu

lkM

itsui

OSK

Lin

e

OperationalOn Order

Operational Fleet

Orderbook

Ship-owners with;79%13%

8%

<5 vessels5-10 vessels>10 vessels


54



Shipbuilding ReviewChapter 6 : LNG Transportation

The LNG carrier market is highly

cyclical and is affected by macro-

economic events.

The LNG shipbuilding business is

top-heavy – the top six shipbuilders

have built or are building 89% of all

LNG carriers. The remaining market is

highly fragmented.

LNG export capacity is anticipated

to increase in the forecast years and

Asian shipyards may not have suf-

ficient capacity to handle this surge in

demand.

Oil price downturn is expected to

keep the average cost of small and

large conventional vessels around

$200m.Figure 65: LNG Carrier Orders by Shipyard and Country of Build 2001-2015

0

20

40

60

80

100

20012003

20052007

20092011

20132015

Ord

ers

by S

hipy

ard

DSME

Hudong

Hyundai HI

Kawasaki

Mitsubishi

Samsung H.I

Other

Figure 66: Average Vessel Cost for 135,000 – 165,000m3 Capacity Carriers

140

150

160

170

180

190

200

210

220

230

20012003

20052007

20092011

20132015

$ m

illio

n

Average Price of Carriers

Entrance of Korean shipyards

Increased demand for carriers

& Higher material costs

Effects of

recession

Oil price

downturn

The LNG carrier market is highly cycli-

cal and is affected by macro-economic

events. The effects of the global economic

downturn in 2008-2009 were evident in

the LNG carrier shipbuilding industry with a

visible decline in orders for the period. The

oversupply of LNG carriers due to orders

in 2004-2005 further exacerbated the situ-

ation. The result was a suppressed market

in 2008, 2009 and 2010. It appears that

the shipbuilding industry has since gained

momentum due to newly found gas supply

and increasing gas demand. The improved

market sentiment has placed upward pres-

sure on demand, accumulating a total of

202 orders within 2011-2014. However,

the decline in spot rates due to oversupply

and the reduction in demand from Japan

could lead to another slowdown, as shown

by the steep drop in YTD orders in 2015.

The LNG shipbuilding business is top-

heavy – the top six shipbuilders have built

or are building 89% of all LNG carriers, and

are Chinese, Korean and Japanese yards.

Recently there has been further interest in

entering the LNG carrier market from new

Chinese players, such as Dalian Shipbuilding

and Jiangsu Rongsheng Heavy Industries.

The remaining market share of the LNG

shipbuilding sector is highly fragmented with

shipbuilders that have won fewer than ten

shipbuilding contracts.

The attractive pricing of work by its

shipyards has led to a preference for Asian

shipbuilders; all but a handful of the orders

for LNG carriers since 2006 have been

awarded to Asia. Between 2001-2015, 74%

of contracts were awarded to South Korean

shipyards, 17% to Japanese shipyards, 7% to

Chinese and the rest to European yards.

LNG export capacity is anticipated to

increase in the forecast years and Asian

shipyards may not have sufficient capacity

to handle this surge in demand. There is

a possibility of yards outside of Asia, such

as European yards, taking on some of this

excess demand, as well as the possibility

of new entrants to the market, particularly

Chinese shipyards. Local content require-

ments in certain areas can also influence

where some of these vessels are built. In

2011, Sovcomflot Group awarded contracts

for four LNG carriers to Asian shipyards

that included local content requirements,

with the intention of technology transfer

and training of the local workforce.

There has been a significant drop in spot

rates in 2015, to half the level seen in 2014

due to the expansion of supply and decline

in demand from Asia; this will filter through

to construction orders.

“Currently, only some shipyards can

build LNG carriers. The shipyards

in China are aggressively entering

this market. The government is very

supportive financially to these plans.

We can expect supply capacity to

increase and the cost of these LNG

carriers to fall accordingly.”

Major LNG Shipyard

South

Korea

74%

Japan

17%

China7%

Spain1%

France

1%


68



Over the hindcast of 2011-2015, Asia had the

highest expenditure on import facilities, their

total spend of $ bn being % of the total.

This was driven by South Korea and Japan in

particular, with gas imports increasing in the

wake of the nuclear shutdown. Over the period,

Asia installed mmtpa of import capacity. Asia will continue to be the biggest investor

in import facilities, forecast to install

mmtpa ( % of the share) for an investment

of $ bn – % of global import Capex over

2016-2020.

Western Europe had the next highest amount

of import capacity coming onstream, at

mmtpa, for a spend of $ bn over the

hindcast. The majority of this new capacity

was in new facilities, such as the Vopak facility

in the Netherlands.

Wariness towards Russia means Western

Europe will continue to build import facilities,

with a further mmtpa coming onstream

for $ bn Capex over 2016-2020, mainly

concentrated in France, Belgium and Spain,

with a few key projects in the Baltic, which is

currently particularly threatened by Russia.North America was historically the third

highest in terms of Capex, spending $ bn, and

capacity, with mmtpa. All of this came

onstream in 2011 alone, with no other pro-

jects taking place. This is due to the advent of

cheap unconventional gas; North America has

no need to import, meaning most projects

were cancelled, or converted to export. For

the same reasons, North America will not

be constructing any new projects over the

forecast period.

Latin America will add another mmtpa

of import capacity over the forecast period,

compared to the mmtpa it added in the

hindcast. Investment, which in the hindcast

was $ bn, is expected to increase over the

forecast to $ bn.The Middle East did not add any new capac-

ity over the hindcast, but is expected to

spend $ bn over the 2016-2020 period,

adding mmtpa.

Eastern Europe & FSU will construct mmtpa

of import capacity compared to mmpta over

the hindcast. The corresponding investment is

$ bn compared to the hindcast $ bn.Australasia, with its own unconventional

boom, did not build any capacity in the hind-

cast and will not in the forecast either.Africa did not add any import capacity in the

hindcast, however, it is projected to spend

$ bn on projects that will come onstream

after the forecast period (2021+).

LNG Import Terminals

Chapter 8 : Market Forecast

A total of $ bn was spent between

2011-2015 on LNG import terminals.

The forecast years of 2016-2020 are

expected to incur a total Capex of

$ bn.

Asia was the largest contributor ( %)

of Capex for import terminals over

the hindcast with total expenditure of

$ bn. Over the forecast period, the

region is expected to continue to be

the largest contributor, accounting for

% of forecast Capex at an expected

amount of $ bn. Western Europe is the second largest

investor in import facilities, building

mmtpa in the hindcast and mmtpa

in the forecast, with $ bn and

$ bn Capex respectively.North America, Australasia and Africa

are not projected to build any import

facilities in the forecast period.

Figure 76: Capex on LNG Import Terminals by Region 2011-2020

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Expe

nditu

re (

$bn)

AfricaAsia

AustralasiaEastern Europe & FSULatin AmericaMiddle EastNorth AmericaWestern Europe Table 12: Capex on LNG Import Terminals by Region 2015-2020

Table 13: LNG Import Capacity Coming Onstream 2015-2020

$ million

20152016

20172018

20192020

Africa

672

AsiaAustralasia

0

EE & FSULatin AmericaMiddle EastNorth America

0

Western Europe

Total

mmtpa

20152016

20172018

20192020

Africa

0

AsiaAustralasia

0

EE & FSULatin America

0

Middle EastNorth America

0

Western Europe

Total

© 2015 Douglas-Westwood 74World LNG Market Forecast 2016-2020By purchasing this document, your organisation agrees that it will not copy or allow to be copied in part or whole or otherwise circulated in any form any of the contents without the written permission of Douglas-Westwood

Eastern Europe and the Former Soviet Un-

ion will represent % of global Capex over

the forecast period. Spending will mainly be

focused on liquefaction in Russia, however,

towards the end of the period import

facilities will be built in the Baltic, as nations

seek to diversify energy supply away from

Russian pipeline gas and towards domestic

LNG regasification facilities.

The vast majority, $ bn, of total Capex

in the region will be spent on liquefaction

facilities. As there were few liquefaction

projects in the hindcast, this is a huge

increase. A particularly noteworthy example

is the first three Yamal LNG trains, the first

of which is expected onstream in 2018.

These three trains alone will contribute

mmtpa to export capacity. Other key pro-

jects include the third train of the Sakhalin

2, and the Pechora LNG projects, however,

these are both being affected by Western

sanctions in the wake of the Ukrainian issue.

Expenditure on import facilities will be com-

paratively small at $ bn over the forecast

period (up from $ bn) – all of which will

be focused in the Baltic regions, which are

trying to gain energy independence from a

more active Russia which is using gas sup-

plies as a bargaining chip. Key projects here

include the Polski LNG, the Estonian Paldiski

project and proposals in many other Baltic

countries. In total, the forecast period should

see mmtpa of import capacity added.

In many Eastern European/FSU countries,

such as Lithuania and Estonia, Gazprom has

a monopoly on the energy supply. Russian

foreign policy is increasingly viewed with

unease, especially the use of gas supply as a

bargaining chip in negotiations with Ukraine.

Consequently, a large driver of the import

market is the drive for energy security

through diversification of supply, reducing

dependence on Russian gas. An EU report

in August 2015 explicitly stated LNG as the

way in which this would be achieved.

The majority of Russia’s gas is currently

transported by pipelines. As Russia looks

to export further, and finds its traditional

markets turning away, it is likely that there

will be increasing expenditure on LNG-

related facilities. The diversification of supply

sources will drive Russia to seek other trad-

ing options outside of European countries

evidenced by its planned pipeline to China.

The region has vast reserves, including

those in Russia and Poland. However, many

of these developments require complex

and expensive construction which is prone

to delays, such as that witnessed in the

Shtokman project. Russia, the region’s key

LNG exporter, has also faced numerous

sanctions as a result of its ongoing politi-

cal tension with Ukraine. Until significant

progress is made, DW does not expect the

region to be a prominent player in the LNG

market over 2016-2020.

Eastern Europe & FSU

Chapter 8 : Market Forecast

% of global expenditure

$ bn forecast expenditure

mmtpa liquefaction capacity

mmtpa import capacity

The region had little liquefaction

capacity installed over 2011-2015, but

it is expected to spend bn in this

area over the forecast period.

Expenditure on import facilities is

expected to grow $ bn, from the

hindcast of $ bn to a total of $ bn

over the forecast period.

It can be expected that Eastern Euro-

pean countries will seek to diversify

their energy sources away from Russia

by developing import facilities in the

coming years.

Russia will continue to invest in

liquefaction to expand its export

capabilities.

Figure 82: Capex on LNG Facilities in Eastern Europe & FSU by type 2011-2020

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Expe

nditu

re (

$bn)

Import

Liquefaction

Table 20: Capex on LNG Facilities in Eastern Europe & FSU by type 2015-2020

$ million 2015 2016 2017 2018 2019 2020

Import

Liquefaction

LNG Carriers 0

Total

BG Group

A Shift in Focus for the Global LNG Business

Capital expenditure (Capex) on Liquefied Natural Gas (LNG) facilities has risen substantially in recent years, due mainly to the growth in the global economy which has been driving demand for natural gas. This trend is expected to continue with total spending on global LNG facilities expected to reach $241bn be-tween 2016 and 2020. This represents a 34% increase compared to the preceding five-year period.

Global LNG Capex has been dominated by Aus-tralasia and Asia in recent years, however, over the forecast period all regions are expected to experi-ence positive growth, except for Australasia where the LNG construction boom looks to be coming to an end, as the country prepares to enter a new production phase. The US now has vast potential as an LNG exporter. However, the approval process for onshore projects remains slow and will limit the growth rate of LNG expenditure in the region over 2016-2020. In the US there are 20 LNG export terminals proposed for the future. Of this 20 pro-posed, 11 export terminals were originally planned for start-up between 2016 and 2020. However, DW has taken a conservative view and anticipates only six will be built over this period. DW expects North America to become a significant market player by the end of the forecast period.

The global LNG Capex outlook to 2020 is character-ised by this regional change in focus, in addition to a weaker projected year for expenditure in 2016. This

is a result of a pause in commitments to new LNG projects as demand growth in Asia has weakened and gas prices have slumped.

By far the largest proportion of the total spend will be attributed to liquefaction projects, where the gas is cooled and condensed to a much smaller size. Worldwide spending in this segment is forecast to total $160bn over the next five years, an increase of 33% over the hindcast period total.

The World LNG Market Forecast 2016-2020 examines trends in the LNG market by region and facility type, supported by analysis, insight and industry consulta-tion. Areas of focus include:• Drivers & indicators – a review of the factors

influencing the LNG market, including growing global energy demand; environmental concerns and sustainable energy; oil & gas prices; majors’ production profiles; E&P costs, local content and geopolitics; drilling & production; diversification of supply and unconventionals.

• Overview of the LNG industry – the LNG chain, major players, contracting practices, spot cargoes and current pricing.

• Supply & demand – outlook, trade flows, future pricing, applications, regional gas & LNG markets and unconventional gas: threat or a feedstock for LNG?

• Supply chain & contractors – EPC contractor market share analysis, construction, liquefaction technology market and regasification.

World LNG Market Forecast 2016-2020energy business insight

e: [email protected] t: +44 (0)203 4799 505


Aberdeen | Faversham | Houston | London | Singapore

To OrderComplete the order form and mail, fax or email us your

details.

Payment: goods will only be dispatched on receipt of

payment in full. A pre-payment invoice will be issued on

request. Payment must be made in UK Pounds. Payment

may be by a cheque drawn on a UK bank.

Credit card owners: give full name and address of the

cardholder and telephone number - you will not be billed

until dispatch.

Copyright: you agree that this report is the copyright of the

authors; it is for use only within your own organisation, will

not be made available in any form to third parties and will

not be copied or transmitted electronically.

Multiple copies: special prices are available on request for

multiple PDF or hardcopies - please call or email for details.

Data tables: supporting databooks to accompany the charts

and tables presented in our market forecasts are available in

Excel format upon request.

Name ........................................................................................ Job Title ..............................................................................

Company .................................................................................................................................................................................

Deliver address ......................................................................................................................................................................

Cardholders address ............................................................................................................................................................

Card Number ......................................................................... CCV number .........................Expiry date .......................

Signature .................................................................................. Email ....................................................................................

Tel no. ....................................................................................... Fax ........................................................................................

EU companies must give an EU VAT number ...................................................................................................

Preferred format: Number of Users: PDF * Single User (1 copy) 3650 UK Pounds Hardcopy ** Multi-User (5 copies) 4650 UK Pounds

Payment Method: Pre-payment invoice AMEX / MasterCard / Visa

Order Form

I understand that the study is copyright and for use only within my organisation. It will not be copied, or otherwise circulated to third parties or distributed electronically. (please tick)

* VAT will be added when applicable** Hardcopy deliveries outside the UK will be via DHL couriers at an additional cost of UK Pounds 60

• Transportation – LNG carrier fleet and ves-sel owners, designs for containment systems & propulsion; plus a review of shipyards and shipbuilding.

• Offshore LNG – liquefaction and regasification terminals.

• Regional analysis – comprehensive examination, analysis and ten-year view of the market, with historic data covering the period 2011-2015 and forecast data for 2016-2020. Capital expenditure by facility type (carrier, import and liquefaction) and region. Liquefaction market in terms of Capex and/or capacity (new and cumulative) by region, new developments and expansion projects, com-ponents and work scopes. LNG carrier market in terms of expenditure and newbuild units by region. Import market in terms of Capex and/or capacity by region, new developments and expan-sion projects, components and work scopes.

Why purchase the World LNG Market Forecast?

DW’s market forecasting is trusted by sector players worldwide, with clients including the world’s top-10 oil & gas companies, top-10 oilfield services compa-nies and top-10 private equity firms.

The report is essential for design engineering houses, engineering, procurement and construction contrac-tors, technology providers, shipping companies, LNG

vessel owners, shipbuilders, oil & gas operators, gas utilities, financial institutions and government agencies & departments wanting to make more informed investment decisions.

Our proven approach includes: • Unique and proprietary data – updated year-

round from published sources and insight gained from industry consultation.

• Detailed methodology – the report uses research from DW’s proprietary ‘World LNG Projects Database’, an in-house information system exclusive to DW. Our global analyst team is involved in the gathering and analysis of the LNG market data through primary research and professional networks. A project-by-project review of development prospects drives a data-rich market model and forecast; with the timing of expenditure phased to reflect the commercial structures of likely projects.

• Market forecasts – comprehensive examination and analysis of LNG expenditure.

• Concise report layout – consistent with DW’s commitment to delivering value for our clients, all of our market forecasts have a concise layout consisting of industry background and supporting materials condensed to enable quick review with ‘speed-read’ summaries of key points throughout.

ISBN 978-1-910045-23-7

2016

World LNG Market Forecast

Prospects, Technologies, World Markets

2016-2020


Contents

Table of Contents

1 Summary and Conclusions ......................................7Summary ......................................................................................................................................... 8

Conclusions .................................................................................................................................... 9

2 Macro Drivers & Economic Overview .............. 10Population & GDP Growth Drive Energy Demand ............................................................. 11

From Black to Green ................................................................................................................. 12

Sustainable Energy ...................................................................................................................... 13

Natural Gas .................................................................................................................................. 14

Oil & Gas Majors – Emerging Company Trends ................................................................... 15

Oil & Gas Challenges ................................................................................................................. 16

Oil Price Volatility ....................................................................................................................... 17

Drilling and Production Outlook ............................................................................................. 18

Offshore Oil & Gas..................................................................................................................... 19

Diversification of Supply ............................................................................................................ 20

Unconventional Oil & Gas ........................................................................................................ 21

3 The LNG Industry .................................................. 22The LNG Chain ........................................................................................................................... 23

LNG Contracting Practices ....................................................................................................... 25

Short-term Trade ........................................................................................................................ 26

4 LNG Supply and Demand ..................................... 28Gas Demand & Supply ............................................................................................................... 29

Regional Gas and LNG Markets ............................................................................................... 30

Gas Supply: Australian Projects in Progress .......................................................................... 31

Gas Supply: Huge Conventional Resources Remain Untapped ......................................... 32

LNG Supply Outlook ................................................................................................................. 33

Unconventional Gas: Threat to LNG ..................................................................................... 34

Unconventional Gas: A Feedstock for LNG .......................................................................... 35

LNG Demand Outlook .............................................................................................................. 36

Applications for LNG: Drivers ................................................................................................. 37

Applications for LNG: Transportation Fuel ........................................................................... 38

Future Outlook for LNG Prices .............................................................................................. 39

5 Supply Chain and Contractors ............................ 40The LNG Supply Chain .............................................................................................................. 41

EPC Contractor: Market Share Analysis ................................................................................ 42

LNG Construction ..................................................................................................................... 43

LNG Liquefaction ........................................................................................................................ 44

Liquefaction Technology Market .............................................................................................. 45

LNG Regasification ..................................................................................................................... 46

6 LNG Transportation .............................................. 47LNG Carriers .............................................................................................................................. 48

LNG Vessel Owners & Analysis ............................................................................................... 49

LNG Carrier Designs: Containment System ......................................................................... 50

LNG Carrier Designs: Containment & Propulsion .............................................................. 51

Shipyard Analysis ......................................................................................................................... 52

7 Offshore LNG ......................................................... 54Offshore Receiving & Liquefaction .......................................................................................... 55

Offshore Receiving & Liquefaction Terminals ........................................................................ 56

8 Market Forecast ...................................................... 57Methodology ................................................................................................................................ 58

The Global LNG Capex by Facility Type ................................................................................ 60

The Global LNG Market by Region ........................................................................................ 61

Liquefaction Terminals ............................................................................................................... 62

Liquefaction Terminals – New Developments v Expansion Projects ................................ 63

Liquefaction Terminals Cost Segmentation ............................................................................ 64

Total Liquefaction Capacity ...................................................................................................... 65

LNG Carriers .............................................................................................................................. 66

LNG Import Terminals ............................................................................................................... 67

Import Terminals – New Developments vs. Expansion Projects ...................................... 68

Import Terminals Cost Segmentation ..................................................................................... 69

Africa ............................................................................................................................................. 70

Asia ................................................................................................................................................ 71

Australasia .................................................................................................................................... 72


Contents

Table of Contents

Eastern Europe & FSU .............................................................................................................. 73

Latin America ............................................................................................................................... 74

Middle East ................................................................................................................................... 75

North America ............................................................................................................................ 76

Western Europe .......................................................................................................................... 77

9 Appendix .................................................................. 78Prospects, Statuses & Conversion Tables .............................................................................. 79

Import Prospects ........................................................................................................................ 80

Liquefaction Prospects ............................................................................................................... 82

Carrier Prospects ....................................................................................................................... 83

Data and Text Conventions ...................................................................................................... 87


Contents

Figures

Figures

Figure 1: Global Capex on LNG Facilities by Region 2011-2020 ..........................................................9Figure 2: Global Capex on LNG Facilities by Type 2011-2020 ...............................................................9Figure 3: Global Population Growth & Energy Demand 1965-2035 ................................................ 12Figure 4: OECD and Non-OECD Energy Intensity, 1980-2015 .......................................................... 12Figure 5: The Changing Energy Mix 1980-2015 ........................................................................................... 13Figure 6: Energy Demand Forecast by Fuel Type, 1990-2040 .............................................................. 13Figure 7: Renewable Energy Capacity, 2000-2014 ..................................................................................... 14Figure 8: Offshore Wind Capacity Additions Forecast, 2015-2024 .................................................. 14Figure 9: Primary Energy Consumption, 2014 .............................................................................................. 14Figure 10: Levelised Cost of Energy ($/MWh) in 2020 ........................................................................... 15Figure 11: Natural Gas Prices ($/mmBtu), 2000-2020 ............................................................................. 15Figure 13: Majors’ Gas Production Index ........................................................................................................ 16Figure 14: Majors’ Oil Production Index .......................................................................................................... 16Figure 12: Control of Oil & Gas Reserves, 2013 ....................................................................................... 16Figure 15: Oil & Gas Production versus E&P Spend, 2000-2015 ....................................................... 17Figure 16: Skilled Workers by Age Category, 2014 ................................................................................... 17Figure 17: Historical Brent and WTI Oil Prices, January 2010-July 2015 ........................................ 18Figure 18: Brent Annual Average Short-term Spot Price Forecasts, 2010 - 2017 ..................... 18Figure 19: Global Oil and Gas Production Forecast by Region, 2005-2021 ................................. 19Figure 20: Global Oil and Gas Wells Drilled Forecast by Region, 2005-2021 ............................. 19Figure 21: Onshore/Offshore Production Split ............................................................................................ 19Figure 22: Onshore vs Offshore Oil & Gas Production, 2005-2021 ................................................ 20Figure 23: Global Deepwater Capex by Region, 2010-2019 ................................................................ 20Figure 24: Sources of European Gas Supply .................................................................................................. 21Figure 25: Sources of Chinese Gas Supply ..................................................................................................... 21Figure 26: Global Unconventional Oil & Gas Resources ....................................................................... 22Figure 27: US Oil Petroleum and other liquid fuels supply by source .............................................. 22Figure 28: Process Diagram of the LNG chain ............................................................................................. 24Figure 29: Typical LNG Business Models ......................................................................................................... 25Figure 30: Tolling Agreement Model .................................................................................................................. 26Figure 31: Spot & Short-Term LNG Trade ...................................................................................................... 27Figure 32: World LNG Estimated Prices .......................................................................................................... 28Figure 33: Global Gas Production ....................................................................................................................... 30

Figure 34: Natural Gas Major Trade Movements 2014 ............................................................................ 31Figure 35: Australian Projects in Progress ....................................................................................................... 32Figure 36: LNG Export Capacity by Country and by Region ............................................................... 34Figure 37: US Unconventional Gas Production & LNG Imports ........................................................ 35Figure 38: China Unconventional Natural Gas Production .................................................................. 35Figure 39: Australian CBM Production ............................................................................................................. 36Figure 40: US Shale and Tight Gas Production ............................................................................................ 36Figure 41: LNG Demand Outlook ...................................................................................................................... 37Figure 42: Permissible Sulphur Content Emission Caps ........................................................................... 38Figure 43: Emission Controlled Areas ............................................................................................................... 38Figure 44: LNG Supply and Demand 2000-2019 ....................................................................................... 40Figure 45: Historic Gas Prices 2000-2013....................................................................................................... 40Figure 46: LNG Supply Chain ................................................................................................................................ 42Figure 47: Contractor Market Share (by project mmtpa) of Installed Liquefaction Facilities 43Figure 49: LNG Construction Process Flow .................................................................................................. 44Figure 48: EPC Cost for Liquefaction Terminals 2000-2020 ................................................................. 44Figure 50: Propane Pre-Cooled Dual Mixed Refrigerant Process ...................................................... 45Figure 51: Market Share of Liquefaction Technology installed in respective periods ................ 46Figure 52: LNG Import Terminal Schematic................................................................................................... 47Figure 53: Submerged Combustion Vapouriser (Closed Loop) .......................................................... 47Figure 54: Development of the LNG Carrier Fleet ................................................................................... 49Figure 55: Annual Average LNGC Spot Rates 2000-2015 .................................................................... 49Figure 56: LNG Carrier Fleet by Class .............................................................................................................. 50Figure 57: Vessel Owners & Fleet Specifications ......................................................................................... 50Figure 58: Current Fleet by Containment System ...................................................................................... 51Figure 59: Membrane System Tank ..................................................................................................................... 51Figure 60: Typical Moss Layout ............................................................................................................................. 51Figure 61: SPB System ............................................................................................................................................... 51Figure 62: Operational Fleet Propulsion System ......................................................................................... 52Figure 63: Orderbook (2015-2017) Propulsion System .......................................................................... 52Figure 64: Shipyard Analysis ................................................................................................................................... 53Figure 65: LNG Carrier Orders by Shipyard and Country of Build 2001-2015 .......................... 54Figure 66: Average Vessel Cost for 135,000 – 165,000m3 Capacity Carriers .............................. 54


Contents

Tables

Figures continued...

Figure 67: Onshore vs. Offshore Liquefaction Indicative Terminal Total Costs ........................... 56Figure 68: Floating LNG Projects ......................................................................................................................... 57Figure 69: Global Capex on LNG Facilities by Type 2011-2020 ......................................................... 61Figure 70: Global Capex on LNG Facilities by Region 2011-2020 ................................................... 62Figure 71: Global Capex on LNG Facilities by Region ............................................................................. 62Figure 72: Capex on LNG Liquefaction Terminals by Region 2011-2020 ...................................... 63Figure 73: Liquefaction Capex – New Developments and Expansion Projects .......................... 64Figure 74: Liquefaction Terminals Cost Segmentation .............................................................................. 65Figure 75: Expenditure on LNG Carriers in Asia 2011-2020 ............................................................... 67Figure 76: Capex on LNG Import Terminals by Region 2011-2020 ................................................ 68Figure 77: Import Capex – New Developments and Expansion Projects ..................................... 69Figure 78: Import Terminals Cost Segmentation ......................................................................................... 70Figure 79: Capex on LNG Facilities in Africa by type 2011-2020 ...................................................... 71Figure 80: Capex on LNG Facilities in Asia by type 2011-2020 ......................................................... 72Figure 81: Capex on LNG Facilities in Australasia by type 2011-2020............................................ 73Figure 82: Capex on LNG Facilities in Eastern Europe & FSU by type 2011-2020 .................. 74Figure 83: Capex on LNG Facilities in Latin America by type 2011-2020 ..................................... 75Figure 84: Capex on LNG Facilities in Middle East by type 2011-2020 .......................................... 76Figure 85: Capex on LNG Facilities in North America by type 2011-2020.................................. 77Figure 86: Capex on LNG Facilities in Western Europe by type 2011-2020 ............................... 78

Tables

Table 1: Carrier Propulsion Systems................................................................................................................... 52Table 2: Global Capex on LNG Facilities by Type 2016-2020 ............................................................. 61Table 3: Global Capex on LNG Facilities by Region 2015-2020 ......................................................... 62Table 4: Capex on LNG Liquefaction Terminals by Region 2015-2020 .......................................... 63Table 5: LNG Liquefaction Capacity Coming Onstream 2015-2020 ................................................ 63Table 6: Liquefaction Capex – New Developments and Expansion Projects .............................. 64Table 7: Liquefaction Capacity – New Developments and Expansion Projects .......................... 64Table 8: Liquefaction Terminals Cost Segmentation .................................................................................. 65Table 9: Cumulative Liquefaction Capacity Forecast 2015-2020 ........................................................ 66Table 10: Expenditure on LNG Carriers by Shipbuilder Region 2015-2020................................. 67Table 11: No. of Newbuilds by Shipbuilder Region 2015-2020 .......................................................... 67Table 12: Capex on LNG Import Terminals by Region 2015-2020 ................................................... 68Table 13: LNG Import Capacity Coming Onstream 2015-2020 ........................................................ 68Table 14: Import Capex – New Developments and Expansion Projects ....................................... 69Table 15: Import Capacity – New Developments and Expansion Projects ................................... 69Table 16: Import Terminals Cost Segmentation ........................................................................................... 70Table 17: Capex on LNG Facilities in Africa by type 2015-2020 ........................................................ 71Table 18: Capex on LNG Facilities in Asia by type 2015-2020 ........................................................... 72Table 19: Capex on LNG Facilities in Australasia by type 2015-2020 ............................................. 73Table 20: Capex on LNG Facilities in Eastern Europe & FSU by type 2015-2020 .................... 74Table 21: Capex on LNG Facilities in Latin America by type 2015-2020 ...................................... 75Table 22: Capex on LNG Facilities in Middle East by type 2015-2020 ........................................... 76Table 23: Capex on LNG Facilities in North America by type 2015-2020 ................................... 77Table 24: Capex on LNG Facilities in Western Europe by type 2015-2020................................. 78Table 25: Conversion Tables ................................................................................................................................... 80Table 26: Import Prospects ..................................................................................................................................... 81Table 27: Liquefaction Prospects .......................................................................................................................... 83Table 28: Carrier Prospects .................................................................................................................................... 84


Notes & Acknowledgements

About Us

Disclaimer

This report is a Douglas-Westwood (DW)

study and all rights are reserved, whether

this pertains to the body of the report or any

information contained within. The information

contained in this document is believed to be

accurate, but no representation or warranty,

express or implied, is made by Douglas-West-

wood as to the completeness, accuracy or

fairness of any information contained in it, and

we do not accept any responsibility in relation

to such information whether fact, opinion or

conclusion that the reader may draw. The

views expressed are those of the individual

authors and do not necessarily represent those

of the publisher.

While we have made every attempt to ensure

the information contained in this document

has been obtained from reliable sources,

Douglas-Westwood is not responsible for any

errors or omissions, or for the results obtained

from the use of this information. All informa-

tion in this document is provided “as is”,

with no guarantee of completeness, accuracy,

timeliness or of the results obtained from the

use of this information, and without warranty

of any kind, express or implied, including, but

not limited to warranties of performance, mer-

chantability and fitness for a particular purpose.

Nothing herein shall to any extent substitute

for the independent investigations and the

sound technical and business judgment of the

reader. Laws and regulations are continually

changing, and can be interpreted only in light

of particular factual situations.

World LNG Market Forecast

is published by:

Douglas-Westwood Limited,

20 East Street

Faversham

Kent

ME13 8AS, UK

tel: +44 203 4799 505

fax: +44 1795 594748

[email protected]

© Copyright Douglas-Westwood

Limited 2015

By purchasing this document, your

organisation agrees that it will not

copy or allow to be copied in part or

whole or otherwise circulated in any

form any of the contents without the

written permission of the publishers.

Additional copies of this study may be

purchased at a specially discounted

rate.

DW report number 573-16

ISBN 978-1-910045-23-7

Production Team

Editor

Steve Robertson

[email protected]

Assistant Editor

Hannah Lewendon

[email protected]

Report Author

Mark Adeosun

[email protected]

Sebastian Dickson

[email protected]

Layout & Graphic Design

Oliver Solly

[email protected]

A supporting databook to accompany the charts and tables presented in this report is available in Excel format upon request.

Date of publication: 21st October 2015


Douglas-Westwood’s Offerings

Notes & Acknowledgements

About Us

Established in 1990, Douglas-Westwood is

a leading provider of market research and

consulting services to the energy industry

worldwide. We have completed over 1,000

projects for clients in more than 70 differ-

ent countries and in some 250 niche energy

segments. Our clients range from the oil &

gas majors and their contractors to financial

houses and governments. We are an

independent organisation and our research

is supported by proprietary data, insight

and knowledge. Our international reach is

backed up by one of the largest sector-

focused teams in offices in the Americas,

Europe and Asia.

Douglas-Westwood clients include the

world’s:

Top-10 oil & gas companies

Top-10 oilfield services companies

“Energy experts Douglas-Westwood”

The Guardian

Consultancy

With an extensive advisory team spanning

three continents, Douglas-Westwood deliv-

ers energy business consultancy services

across the globe. DW consultancy services

are focused on the strategic planning pro-

cess, helping our clients to make investment

decisions, develop and test advanced com-

petitive strategies for new products, new

business streams, mergers and acquisitions,

We provide consultancy services through

advanced market insight, modelling and

simulation to a client base which includes

players in oil & gas E&P, oilfield services,

conventional & renewable energy and the

public sector.

Douglas-Westwood has supplied con-

sultancy services to over 250 companies

worldwide.

“Foremost oilfield services

market consultant”

Hong Kong client

Transactions

Douglas-Westwood provides sector-

focused commercial due-diligence and

transactions services to major and mid-tier

private equity firms, investment banks

and debt providers. We have industry-

leading credentials including both buy-side

and sell-side mandates, public-to-private

transactions, re-financing, IPOs and project

financing ranging in enterprise value from

$5 million technology firms to $1 billion

oilfield service, engineering and equipment

companies.

Douglas-Westwood clients include the

world’s:

Top-10 private equity firms

Top-10 investment banks

“Douglas-Westwood provides

great value to us”

Perth client

Research

Business research, analysis and market

forecasting is our core activity. Over the

years we have built a huge knowledge base

of both sectors and players. Our experience

of researching the oilfield services sector

(OFS) is unparalleled worldwide. We spe-

cialise in emerging markets and technolo-

gies, from offshore windpower to subsea

processing and difficult to access markets

and geographies including Russia and the

Middle East. Our custom research offerings

include: gathering & analysis of market data,

independent marketing and forecasting,

measurement & analysis of competitive po-

sitions and industry consultation & in-depth

perception surveys.

Douglas-Westwood have researched some

250 different business sectors to wide

international acclaim.

“Top energy research group

Douglas-Westwood”

Financial Times

Publications

Douglas-Westwood produces original en-

ergy business market studies and forecasts,

now highly acclaimed and used worldwide.

In oil & gas we were the first firm to

forecast & value the growth of key offshore

markets such as deepwater, subsea produc-

tion, global onshore drilling, pipelines and

offshore wind power.

Our reports are geared to meet senior

executives’ needs in business planning and

decision-making and assume no previous

reader knowledge of the subject area. Each

offers a concise, region by region format.

Analysis is based on our extensive in-house

project databases and models combined

with forecasting expertise developed over

many years.

Douglas-Westwood has over 20 energy

sector market forecast titles in print.

“An excellent report in all areas”

Houston client

World LNG Market Forecast 2016-2020 Leaflet + Contents

Economy & Finance

Transcript of World LNG Market Forecast 2016-2020 Leaflet + Contents