Over 20 projects with some 242 mt/y of new LNG export capacity are scheduled to make Final Investment Decisions (FID) in the remaining part of 2021. Together with FIDs scheduled for 2022 and 2023, this amounts to new capacity equal to the global volume of LNG trade in 2020. About half of this “FID backlog” is at projects in North America. This is the highest backlog to date, outnumbering last year’s 205 mt/y expected by end-2020.
So far this year, less than 10 mt/y in new export capacity has started up globally.
Although the prospects for LNG demand growth in the next 5-10 years are good, and we expect some 100 mt/y of new capacity is likely to be needed by 2025, these proposed projects face significant headwinds as they move toward FID. First, there is the near-term competitive environment: Qatar has committed to adding more than 30 mt/y by 2025, with some of the lowest break-even costs in the business; and close to 40 mt/y of new capacity is already under construction in the US. LNG buyers like the competitive supply environment and are reluctant to enter into restrictive long-term contracts.
More broadly, accelerating decarbonization targets, while positive for LNG demand in the near term, are adding to uncertainty in the long-term demand growth projections for natural gas and LNG. Some financial institutions, including the European Investment Bank, are backing away from all fossil fuel investments. Already in 2021, 65 mt/y in LNG supply has pushed FID to 2022, and we expect delays will only grow by the end of the year.
Marsoft’s LNG Regas and Liquefaction Report for Q3 21 is now available, for more information contact one of our offices.