North American LNG Sector Is Getting Crowded, an Industrial Info News Alert

Rhea-AI Summary

Industrial Info Resources reports on the emergence of new liquefied natural gas (LNG) export facilities in North America, aimed at improving energy security. A notable project is the $7.2 billion Ksi Lisims LNG facility in British Columbia, capable of processing 2 billion cubic feet of natural gas per day. This follows consent for the Cedar LNG project, contributing to Canada's access to global markets. Despite these developments, Canadian natural gas production is projected to decline from 15.5 billion cubic feet per day in 2020 to 13 billion by 2050. In the U.S., LNG exports are forecasted to rise to 12.7 billion cubic feet per day next year, driven by stable production levels.

Positive

• Ksi Lisims LNG facility enters environmental review, potentially boosting LNG exports.
• Cedar LNG project approved, enhancing Canada's LNG export capabilities.
• U.S. expected to become largest LNG exporter, surpassing Australia and Qatar.

Negative

• Canadian natural gas production expected to decline steadily to 13 billion cubic feet per day by 2050.
• EIA predicts flat natural gas production for 2023 due to reduced drilling in response to lower prices.
• Volatility in the LNG market poses risks to long-term profitability.

SUGAR LAND, Texas--(BUSINESS WIRE)-- Researched by Industrial Info Resources-- Industrial Info Resources (IIR) finds that a wave of new export facilities for liquefied natural gas (LNG) in North America helps solve some of the recent energy security issues, but if the criticism is valid, it does little to address economic concerns at home.

The provincial government of British Columbia opted to let the US$7.2 billion floating Ksi Lisims LNG facility enter the environmental review process. As planned, the facility would be able to process as much as 2 billion cubic feet of natural gas per day into super-cooled LNG, presumably for the Asian economies. Subscribers to Industrial Info's Global Market Intelligence (GMI) Production Project Database can click here for more details.

That followed consent for the Cedar LNG, another project slated for Canada's western coast, and both come on the heels of a positive step forward for Shell plc's (NYSE:SHEL) (London, England) mega project at Kitimat, British Columbia.

Subscribers can click here for the report on the Cedar project and here for Shell's project.

Combined, the three facilities offer something rare for Canada -- access to markets outside of North America. But it may come with a catch. Federal forecasts show marketable Canadian natural gas production may have topped out at 15.5 billion cubic feet per day in 2020 and is on pace for a slow, but steady decline to about 13 billion cubic feet per day by 2050.

For Canada's southern neighbor, there's no shortage of similar developments. Consultant group Wood Mackenzie expected the United States, if it hasn't already, to pass Australia and Qatar this year to become the largest LNG exporter in the world.

Federal U.S. estimates show total LNG exports averaged 10.6 billion cubic feet per day last year and that could expand by nearly 20% to reach 12.7 billion cubic feet per day next year.

U.S. natural gas production, meanwhile, is expected to hover around 100 billion cubic feet per day for the foreseeable future. Natural gas remains an essential component of the domestic energy mix and production is expected to linger close to the five-year average.

In terms of pricing, the U.S. Energy Information Administration (EIA), the statistics office of the Department of Energy, offered a mixed outlook. The price for Henry Hub, the U.S. benchmark for the price of gas, could move higher as a result of increased LNG exports, but not enough to stimulate more production.

"We expect natural gas production will be relatively flat for the rest of 2023 as producers reduce drilling in response to lower prices," the EIA's monthly market report for March stated.

LNG exports are nothing new -- the first deliveries were made during the 1950s as the Cold War was developing. Russia's invasion of Ukraine in early 2022 brought a wave of new interest in LNG deliveries because they have less of a geopolitical consequence than piped natural gas.

Ukraine hosts a dense network of Soviet-era pipelines that were designed to meet European natural gas needs. Cross border pipelines, such as the now-abandoned Nord Stream network in the Baltic Sea, require multinational cooperation and multinational commitments to develop and effectively tie suppliers and consumers together.

LNG does that too in the form of long-term sales and purchase agreements, though the bonds are less concrete and rarely, if ever, multinational. Nevertheless, with the United States taking on Russia's market share in Europe, the super-cooled form of gas does broadcast power over the horizon.

But it may come with tradeoffs. While LNG supports Western allies and feeds the energy-hungry markets of Asia, it's a volatile market sector, as warnings from both the EIA and the Canadian energy regulator suggest.

To be clear -- neither country will run out of natural gas. The Canadian Gas Association, for example, estimates the nation has enough reserves to satisfy more than 200 years of annual demand.

But too much too fast could overwhelm the sector. Volatility in natural gas prices makes it difficult to bet on the future and exports take away from domestic needs. In the U.S. economy, renewables start to take on a greater share of the grid, but natural gas still accounts for nearly 40% of total U.S. electricity.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).

View source version on businesswire.com: https://www.businesswire.com/news/home/20230324005065/en/

Brian Ford

Ph: 713-783-5147

Source: Industrial Info Resources

FAQ

What is the significance of the Ksi Lisims LNG facility for Shell (SHEL)?

The Ksi Lisims LNG facility aims to enhance LNG export capabilities, marking a significant investment opportunity for Shell (SHEL) and increasing energy security.

How does the Cedar LNG project impact Shell (SHEL)?

The approval of the Cedar LNG project positions Shell (SHEL) to benefit from expanded access to international LNG markets.

What are the expected LNG export levels from the U.S. in 2024?

U.S. LNG exports are forecasted to rise to 12.7 billion cubic feet per day in 2024, reflecting growth in the sector.

What are the production forecasts for Canadian natural gas affecting Shell (SHEL)?

Canadian natural gas production is projected to decline from 15.5 billion cubic feet per day in 2020 to 13 billion by 2050, impacting overall market dynamics.

What risks does the LNG market present for Shell (SHEL)?

The volatility in the LNG market and fluctuating natural gas prices could affect profitability and investment strategies for Shell (SHEL).