Energy industry consultancy, Douglas-Westwood (DW), predicts that the trend of growing capital expenditure (Capex) on LNG facilities will continue, reaching US$241 billion between 2016 and 2020.
The Capex rise has mainly been spurred on by the growth in the global economy that has driven demand for natural gas, the DW report issued on Tuesday revealed.
DW’s Hannah Lewendon, stated, “Emissions from the burning of fossil fuels has become an increasingly important consideration in recent decades. In light of environmental damage from energy consumption, there has been movement towards the use of cleaner fuels.”
Natural gas is seen as a mechanism for reducing emissions as it only emits half of the greenhouse gases of coal.
Lewendon added the low-carbon roadmap agreed at the recently concluded COP21 will expedite the shift towards gas that is regarded as the “bridging fuel” to renewables in the future. Tighter environmental legislation will also animate the transport and power generation industries in using LNG as an alternative fuel, in addition to the price arbitrage effect.
Mark Adeosun of DW concluded, “In the decades ahead, natural gas will play an increasingly significant role in meeting the world’s energy demand. The long-term potential of the LNG industry is evident as vast reserves of natural gas found in remote regions such as East Africa and the Arctic present considerable LNG opportunities for the future.”
He noted that in the short-term, LNG spot price declined rapidly due to a combination of low oil prices and a fall in Asian economic growth forecast, adding that low hydrocarbon prices remain a concern as most LNG contracts are linked to oil price.
“Therefore, the global LNG Capex outlook to 2020 will be characterised by a change in regional spend. The weaker projected expenditure in 2016 will be a result of a pause in commitments to new LNG projects,” according to Adeosun.
He revealed that, out of the total expenditure over the forecast period 66 percent will go to the liquefaction projects, import facilities will take up 21 percent while LNG carrier newbuilds will take 13 percent of total expenditure between 2016 and 2020.
LNG World News Staff