LNG export faces obstacles to long term viability, but Engineers still win.

by Richard Spragg 

Sabine Pass, where an export terminal is planned for 2015

With a century’s supply, no predicted increase in domestic demand and higher prices in Europe and Asia, it’s easy to see why excitement is growing around gas exports. Morgan Stanley estimates that North American LNG export capacity can reach 10% of production by 2015. But there are inherent problems when it comes to LNG exports, and this optimism may be misplaced. Here are just a few  reasons why growing export markets will be challenging.

The US is remote from key markets

It’s hard to compete with Russia and Australia in the supply of the booming Asia market. With Nuclear power under threat, LNG is likely to pick up some of the slack in the region. In addition, China’s current usage (11% below global averages) is likely to increase. But the long voyage from the US makes it difficult for US exporters to capitalize on these markets.

Current US Infrastructure

The US has 12 LNG terminals in Maryland, Georgia, Louisiana, Texas and Massachusetts.  All are primarily designed for domestic supply and none have significant export capabilities. On the upside, projects are planned to increase export facilities - including the retrofit of a terminal for liquefaction at Sabine Pass, the USA’s largest LNG plant by Cheniere Energy. This will not be operational for three years.

Too many variables affect pricing

Successful exports depend on the domestic price of gas remaining low (Right now domestic prices have been stagnant at $4 mmbtu - currently $3) and international prices remaining high (UK - $9 / Asia - $13). And while the price remains tied to oil, crude prices would have to remain high too. All of this may well happen, but it may not.

Regardless of whether the US develops a significant LNG export business, the news is good for hiring companies engaged across the sector who will see varied and interesting project opportunities upgrading the infrastructure. What’s good news for them is good news for the engineering and construction job market, which will continue to expand as investment in LNG grows.

It's a case of 'Build it. They will come.' In the meantime, the work will continue to everyone's benefit.








Richard Spragg writes on various subjects including global engineering staffing and global engineering jobs.