With the prospect of second and third LNG projects, where will PNG fit in to the global LNG market.
The liquefied natural gas (LNG) industry marks its 50th birthday this year.
The first commercial-scale LNG plant opened in Algeria in 1964. LNG demand continues to grow globally, particularly in Asia, and a number of new suppliers are poised to enter the LNG market, particularly in North and Latin America. By the end of 2012, 17 countries had joined the club of LNG exporting countries and PNG becomes the 18th member when its exports of LNG begin later this year.
The world’s leading LNG exporters are currently Qatar, Malaysia and Australia. PNG’s LNG plant has two trains (or liquefaction and purification facilities), which can process up to 6.3 million tonnes (mtpa).
The discovery of new gas forms such as shale and coal seam gas, which produces lower carbon emissions than coal, has significantly boosted expectations of supply. Ten years ago, suggests The Economist, LNG resources were expected to last 50 to 60 years. With new ‘forms’ of gas, supplies may now last 200 years.
There are almost two dozen US LNG export projects and up to another dozen are on the drawing board in Canada.
Analysts say energy policies in Washington and pricing policies in Canada are holding back those projects and will determine the eventual size of North American LNG exports.
Australia has seven LNG projects under development, with its LNG exports expected to quadruple over the next five years.
When plants under construction are added to current capacity, Australia will be the lead exporting country, followed by Qatar, the current leader, with Indonesia third.
LNG demand is expected to average annual growth of around 5% til 2020, and by 2020, the number of countries capable of importing LNG is expected to reach 50, double the number compared to 2011.
Asian buyers, including China, India, Japan, South Korea and Taiwan, currently take about 70% of global LNG exports. China and India are expected to be the biggest LNG consumers, with China aiming for its energy ‘mix’ to contain 20% gas by 2020. Four Asian companies will buy 95% of PNG LNG: China Petroleum and Chemical Corporation (2 mtpa) Osaka Gas Company Ltd. (1.8 mtpa), The Tokyo Electric Power Company Inc. (1.8 mtpa) and Chinese Petroleum Corporation of Taiwan (1.2mtpa).
Historically, LNG prices were linked to oil prices because LNG was displacing oil. That pricing practice continued until US companies proposed their own LNG export projects. According to Hiroshi Hashimoto, a senior gas analyst with the Institute of Energy Economics of Japan, the aim is to link 100% to US (known as Henry Hub) prices, rather than JCC (Japan Customs Cleared) prices.
A 2009 economic impact study estimated the PNG LNG project would increase PNG’s oil and gas exports more than fourfold, earning about K11.4 billion, to be shared by the joint venture partners. The Governor of the Bank of PNG, Loi Bakani, says ‘taxes, dividends and royalties that will accrue to PNG Government, and landowners … will be in the range of a low of K2.0 billion a year to a peak of K14.0 billion a year.... PACNEWS
PORT MORESBY, (BUSINESS ADVANTAGE PNG)