The liquefied natural gas (LNG) sector has been hit by severe project disruptions and delays to final investment decisions (FIDs) of 26 LNG export terminals globally, a report by Global Energy Monitor revealed Thursday.
The annual report entitled Nervous Money: Global LNG Terminals Update 2021 confirms that climate change, security concerns, the economic slowdown due to Covid-19, and feasibility concerns are among the main reasons leading to disruptions.
The report confirms that delayed LNG export terminals account for 38% of the 700 million tonnes per annum of export capacity under development worldwide.
The capacity of delayed export terminals total 265 million tonnes per annum, it said.
Total’s declaration of a force majeure on its Mozambique LNG terminal, following an attack by insurgents, has highlighted the vulnerability of terminals priced in the tens of billions of dollars, the report said.
"The cost overruns, scheduling delays, and high outage rate that plagued the LNG sector were further exacerbated in the past year by Covid-related workforce disruption."
Only one LNG export project worldwide, the Costa Azul LNG terminal in Mexico, reached an FID in the past year.
- Opportunity narrows for more export capacity
For 64% of the global export capacity in construction or pre-construction, North America has the most troubled projects with 11 of the 26 LNG export terminals reporting FID delays or other serious disruptions.
According to the report, "aggressive expansion of capacity in low-production-cost Qatar and the Russian Arctic has increased risks to US LNG export developers.”
Global Energy Monitor also noted in the report that once regarded as a potential climate solution, the LNG sector is increasingly seen as a climate problem particularly for European buyers.
The International Energy Agency (IEA) said last month that inter-regional LNG trade would need to decline rapidly after 2025 under a 2050 net-zero scenario.
"Those who are accustomed to thinking of infrastructure as a 'safe' investment may be in for a rocky ride with LNG terminals," said Ted Nace, executive director of Global Energy Monitor.
He said the opportunity has narrowed for more export capacity to be built. North American projects have fallen behind as European buyers in particular see them as dirty due to their reliance on fracked gas. These projects also face stiff competition from Qatar and Russia, which have access to cheaper gas.
- LNG import capacity on growth
Nonetheless, LNG import capacity is continuing to expand rapidly, with enough projects in construction or pre-construction to increase global capacity by 70%.
"Of the capacity in construction or pre-construction, 32% is in China, 11% is in India, and 7% is in Thailand. Outside Asia, Brazil is a hotspot with 13 LNG import terminals in construction or pre-construction," the report revealed.
The lead author of the report, Lydia Plante explained that LNG was sold to policymakers and investors as a safe, clean, secure bet, but these attributes have turned into liabilities, and this has been reflected in the IEA 2050 scenarios showing that LNG has no place in a climate-safe energy future.
"The sheer size of the projects has exposed investors to catastrophic losses," she said.
"The industry has lost its climate halo, and the only question is whether the Biden Administration will waste precious political capital propping up potential white elephant projects," she concluded.
By Nuran Erkul Kaya