Natural Gas

A new report by Douglas-Westwood Ltd. shows that the worldwide LNG industry may be on the very edge of what could be called a golden age.

Oil &; Gas manager Steve Robertson says that cost increases for gas, steel, tankers and political issues on every level have hit the LNG industry have hit near-term investments.

But, Robertson says, capex for the world’s LNG industry is expected to reach $106.8 billion between 2009-2012. The money will be spent on export terminals, carriers and import terminals.

“The outcome of our research and market modeling shows that project delays will create an expenditure profile that has significant year-on-year peaks and troughs, since we allocate project expenditure to the year of start-up,” Robertson says. “However, the overall conclusion is the LNG remains a growth market and expenditure levels will continue to follow an upward trend.”

Report author Lucy Miller says that the lions share of the funds will be spent in Asia.

“Over the forecast period, the region accounts for 43% of the$106.8 billion of our global forecast,” Miller says. “The Middle East region is the next most significant and together the two regions account for 58% of the total expenditure.”

Miller adds that the limits of domestic gas production are becoming more clear every day in North America and Western Europe. Gas imports to these two areas are on the rise, and are expected to continue to rise.

“Increasingly, LNG is a method of choice in satisfying growing gas demand in these regions,” Miller says. “Following the success of the terminals established in Nigeria and Trinidad &; Tobago, the wave of new projects that has emerged demonstrate a potential for serious market growth over the next five years.”

How will the money be spent? According to the report:

1. The construction services’ sector is forecast to grow from $1 billion in 2007 to just under $3.8 billion in 2012.

2., LNG storage tanks and engineering and procurement services are expected to account for more than $10.9 billion, or about 27% of the capex.

Despite this, the political opposition that LNG terminals face on the U.S. East and West coasts will not go away. In fact, in Oregon and in the New England states, the opposition is becoming more determined and ranges from local opponents to opposition in state capitols and in the halls of the Congress.

While the worldwide LNG industry may be entering a golden age, the U.S. portion of that industry may not share in the spoils.

Stay tuned. More to come.

–John A. Sullivan, News Editor, Oil and Gas Investor, www.OilandGasInvestor.com, jsullivan@hartenergy.com

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