- There are so many proposed liquefied natural gas projects around the world that building them all would triple current global LNG capacity. But most of them will never get built due to a lack of investor demand in the wake of the COVID-19 crisis, according to the latest report from the International Gas Union.
- More than half of the proposed new facilities are in the United States and Canada, due to the growth of shale gas output in North America over the past few years, according to IGU. The report found that there was only a 4.6% increase in global liquefaction capacity in 2020, as just three new plants came online, all in the U.S. Only one proposed plant, the Energia Costa Azul facility in Mexico, was commercially sanctioned and cleared for new construction, marking the slowest pace of greenlighted projects in the sector since 2008.
- "Global liquefaction capacity would increase three-fold if all these projects materialize, although this is highly unlikely," the IGU said in its report. "The COVID-19 pandemic, which inflicted further price shocks on gas markets, has forced cash-strapped developers to hold back on capital-intensive… liquefaction projects."
The report wasn't all bad news for construction companies in the U.S. that focus on gas projects. For example, while large-scale projects have increasingly been shunned by investors who are still uncertain about the lasting impacts of the pandemic, smaller projects have in turn become more attractive.
"This puts small-scale LNG in the spotlight, as it remains a growing segment within the wider LNG sector, thanks to significant commercial potential and lower investment costs," the report stated.
Many of the possible projects in the U.S. are of that smaller scale variety, the report said.
"The currently proposed U.S. LNG projects are mainly greenfield projects that consist of multiple small- to mid-scale LNG trains delivered in a phased manner," the report said. "This provides flexibility in securing long-term off-takers, and increases competitiveness in project economics through modular construction."
The report highlighted several examples of those types of projects, including Elba Island LNG in Georgia, and Plaquemines LNG and Driftwood LNG in Louisiana.
2020 was an exceedingly tough year for gas-related construction. While the impacts of the worldwide pandemic were felt by all sectors, those factors were compounded in the gas industry by an already increasing supply glut that ran headlong into diminished demand as global commerce slowed. At the same time, environmental backlash intensified against the sector in general.
In the U.S., for example, the high-profile Keystone XL pipeline that would have brought petroleum from Canada to the Gulf of Mexico suffered an inauspicious end last week, when TC Energy said it was pulling the plug on the embattled project.
That followed the cancellation of the Atlantic Coast Pipeline in July 2020, and the continuing controversy over Enbridge's Line 5 pipeline under the Great Lakes through the Straits of Mackinac, against which local indigenous tribes and environmental groups are fighting.
Enbridge's Line 3 pipeline, which is slated to carry oil-sands crude from Alberta, Canada, to Wisconsin, did have a rare win Monday when the Minnesota Court of Appeals upheld its permit, even as protestors continued to clash with police over the project.