Unrest in East Africa threatens LNG supply
The global liquefied natural gas market will face tight supplies and higher prices during the second part of the decade because of project delays in Mozambique, according to Norwegian energy research firm Rystad.
Meanwhile, Gulf Coast producers that are set to begin production at several plants in the coming months would be among those who benefit as demand surpasses supply.
The LNG industry has proved resilient during the pandemic, benefiting from growing demand in Asia as China and South Korea brought COVID-19 under control in September, and extremely cold weather raised demand for heating gas. But Rystad says it’s unclear if the LNG industry can balance long-term supply with demand.
Forecasts for the LNG market are being adjusted because of delays in the development of the two LNG projects in Mozambique,
where ISIS-affiliated insurgents have terrorized civilians, Rystad said.
French oil major Total recently canceled contracts amid the violence, signaling an indefinite delay at its Mozambique LNG complex, according to Rystad, while the insurgency threatens Exxon Mobil’s Rovuma LNG, which has not yet been sanctioned. The two projects represent 28 million tons per year of LNG capacity.
As a result, there could be a disruption in global LNG market balances of up to 9 million tons per year between 2026 and 2030.
Rovuma LNG’s 15.2 million tons per year of potential capacity could be unavailable in 2027 and 2028, Rystad said, and if the plant fails to reach full production until after 2030, supplies could tighten even further.
Although Rovuma LNG lags behind Mozambique LNG, its forecast delay from 2027 to 2029 is likely to have a larger impact on the market as its production is taken off an increasingly balanced market, contributing to higher prices toward the end of this decade, Rystad said.
“The ongoing insurgency in the Cabo Delgado region, while initially seeming manageable, appears to have dented Mozambique’s LNG dreams,” LNG analyst at Rystad Energy Kaushal Ramesh said in the release. “We now expect Total’s Mozambique LNG to start production only in 2026, with construction unlikely to resume without demonstrably stronger security arrangements at the Afungi site. Rovuma LNG may be delayed enough to mean it is brought online only around 2029.”
Along the Gulf Coast, however, several companies are eager to launch operations. Houston LNG company Cheniere Energy is moving ahead with construction of a sixth unit, scheduled for completion next year, at its Sabine Pass facility in Louisiana. The Virginia company Venture Global told U.S. regulators last month that its Calcasieu Pass plant in Cameron Parish, La., could ship its first cargo in late 2021. And Sempra Energy, which also operates an LNG export terminal in Cameron Parish, is moving forward with the development of another LNG complex in Port Arthur.
As well, Qatar Petroleum recently committed nearly $28.8 billion to develop the world’s largest liquified natural gas project, capable of producing 32 million metric tons of LNG per year. The expansion would help Qatar become the world’s largest LNG producer by 2030, according to Rystad and research firm Wood Mackenzie.
Mozambique was expected to rise to the upper ranks of global LNG producers by the middle of this decade, because it offers the LNG market a large, low-cost resource, making its LNG projects highly competitive. As well, the country’s location in southeast Africa positioned it well to supply Asia, Rystad said.