LNG Import Terminals Add-Ons Boast Advantages

(Reuters) – North American LNG exporters are sounding more confident about the prospects for new projects in 2021 due to a recent rally in prices driven by surging Asian demand, even as most industry analysts expect next year to be another difficult one.

Gas futures in Europe and Asia have climbed to their highest levels in more than a year due to a sharp increase in demand late in 2020, especially out of China, where buyers have scrambled to secure supply. Asian nations have driven record growth in LNG as they seek to replace dirtier coal plants and fuel growing energy consumption.

Numerous projects slated for groundbreaking in North America were put off in the past two years due to historically weak prices and worries about oversupply. With spot prices in Asia hitting a six-year high, LNG operators are seeing greater interest in long-term supply deals that could allow developers to build new export plants.

Tom Mason, general counsel at Energy Transfer, which is developing an LNG export plant at its Lake Charles import facility in Louisiana, said the rise in prices “has translated into a pickup in traction with customers for long-term commitments for LNG purchases.”

At the start of 2020, a dozen or so ventures said they planned to make final investment decisions to build new projects in the U.S., Canada and Mexico by the end of this year. Only one of those plants went forward: Sempra Energy’s $2 billion addition to its Costa Azul LNG import facility in Mexico. All others were delayed because not enough buyers were willing to sign long-term deals to finance the multibillion-dollar projects with spot prices so low. There are now 14 North American projects awaiting FID in 2021, most carried over from 2020, but analysts do not expect all to go forward next year.

Analysts said “brownfield” projects built at existing LNG terminals like Energy Transfer’s Lake Charles or Sempra’s Costa Azul have a better chance of going forward than “greenfield” projects. “Brownfield projects tend to involve less cash and shorter development lead times,” said Henning Gloystein, of the Eurasia Group in Singapore.

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