Anatol Feygin, executive vice president and chief commercial officer, Cheniere talks exclusively to Pipeline Magazine about the future of the LNG industry and why Asia will continue to be a key growth engine for the industry
The global gas and LNG markets have been going through an enormous transformation. In 2016, Cheniere started long-term LNG exports from the lower 48 states, something that was unthinkable just 10 years ago, and completely changed market dynamics, trends and business deals.
The US has many LNG projects that aim to reach final investment decision (FID) and are trying to get underway by 2020. In your opinion, over the next 5 years how many projects do you see reaching FID and how do you see the global market evolving?
The US currently has 17 LNG export project proposals filed with FERC or MARAD, representing a total capacity of over 200 million tonnes per annum (mtpa).
This is equivalent to just over 75 percent of the total LNG trade in 2016. So it is clear that not all of these projects will progress. We believe that the advantage lies with the expansion projects, with existing tanksand marine infrastructure providing a cost advantage over green-field developments.
Also the existing projects already have a trade relationship with the buyers and in our case we have already proven ourselves in terms of project delivery and ongoing operation at our Sabine Pass LNG project. This is both in terms of the LNG plant being built on-time and on budget and in terms of sourcing the gas supply for the plant. So we would contend that few of the new US projects are likely to reach FID over the next 5 years, but obviously the market will decide.
We see the global market evolving rapidly at present and that speed of change only looks set to increase as US volumes ramp-up over the next few years. The destination-free LNG volumes from the US will drive an increase in liquidity in the LNG trade that will help it become more resilient to market shocks and more responsive to buyers’ needs. However, I also think we are still quite a way from being a fully commoditised product, like crude oil for example.
When will the second wave of LNG reach the market? And how much more competitive can the sector be?
There has been a well reported slowdown in contracting from buyers in the last couple of years as they ‘digest’ the large amount of volume coming to market at present. However, market balances suggest new volumes will be required to meet ongoing demand growth early next decade. Buyers with a need for new volumes will need to take account of the four to five year lead time to commercialise and construct new LNG export capacity when they time their new commitments. This means that we should start to see some new commitments in the next year or two.
We believe the US, and Cheniere in particular with already permitted expansion capacity, can be very competitive in terms of both cost and speed to market. But that doesn’t mean that we, the suppliers, shouldn’t continue to make every effort to become even more competitive, so that we can firmly underpin our message to buyers and policy makers that gas is available, affordable and secure. This is something Cheniere continues to do as we review the potential of mid-scale trains for our current two sites.
The US and China have strengthened their relations and Cheniere recently opened an office in China. How much more demand do you see coming from China in the next 3-5 years? And do you believe we will see an increase in LNG imports from Asia?
We were very pleased to announce that Cheniere opened an office in Beijing in July.
Chinese LNG demand has grown rapidly over the past decade and this looks to be a very prospective market in terms of future growth. From first imports in 2006 it looks set to become the second largest LNG importer after Japan in the next year or two. It has been growing at around 2.5 mtpa on average over the past decade. We see that growth rate increasing, possibly more than doubling, over the next 3 to 5 years and probably well beyond that as China’s economy continues to grow, as it continues to urbanise and as it aims to improve urban air quality and control carbon emissions.
Asia currently accounts for just over 70 percent of all LNG imports. We believe it will continue to maintain this majority share as the overall industry grows. So Asia is not only set to continue to increase, but will continue to be a key growth engine for the industry.