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Price falls challenge LNG liquefaction projects in US amid Covid-19: Poll

20 Apr 2021 (Last Updated April 20th, 2021 13:00)

Verdict has conducted a poll to analyse the key challenges for LNG liquefaction project development in the US amid the Covid-19 pandemic.

Price falls challenge LNG liquefaction projects in US amid Covid-19: Poll
Credit: Ken Hodge.

The US LNG exports are projected to average at 8.5 billion cubic feet a day (bcf/d) in 2021 and reach 9.2bcf/d in 2022, according to the U.S. Energy Information Administration (EIA).

Verdict has conducted a poll to analyse the key challenges for LNG liquefaction project development in the US amid the Covid-19 pandemic. Respondents were asked to choose one among four key challenges, namely decline in oil and gas prices, capital expenditure cuts by companies in 2020, fall in LNG demand in consumer markets such as Asia, and delays in final investment decision (FID) and project execution.

Analysis of the poll responses shows that decline in oil and gas prices is the key challenge, as opined by a majority 34% of the respondents. Capital expenditure cuts by companies in 2020 was viewed as a key challenge by a lesser 27% of the respondents.

Further, 26% opined that fall in LNG demand in key consumer markets such as Asia to be the key challenge and 13% voted FID and project delays as the key challenge.

Challenge for LNG liquefaction project development in the US

The analysis is based on 204 responses received from the readers of Offshore Technology, a Verdict network site, between 21 August 2020 and 12 April 2021.

COVID-19 impact on LNG liquefaction project development in the US

Several new LNG projects that were expected to reach FID by 2020 were postponed to 2021 owing to the Covid-19-induced decline in demand and lower oil and gas prices. Currently, 13 projects in North America are awaiting FID in 2021, although just one or two are expected to make through this year.

Venture Global LNG’s Plaquemines LNG export plant in Louisiana, for example, is one among them, which is anticipated to reach FID in 2021. The plant will have an export capacity of up to 20 million metric tonnes per year and is likely to begin commercial operation by 2024.

Capex cuts, project postponement, and difficulty in procuring buyers are expected to delay all the pre-FID projects by one to two years, according to Giovanni Bruni and Alessandro Agosta, partners at McKinsey & Company.