SOURCE: Lux Research

Lux Research

May 15, 2014 07:30 ET

Shale Gas Drives $120 Billion Worth of LNG Projects in North America

Bringing U.S. Gas Onto the $170 Billion Global Liquefied Natural Gas Market Will Raise Prices at Home, and Australia Is Emerging as a Serious Export Challenger, Lux Research Says

BOSTON, MA--(Marketwired - May 15, 2014) - The shale gas boom in North America has triggered a massive build-up of liquefied natural gas (LNG) infrastructure, with companies investing a whopping $120 billion in a bid to capture a slice of the lucrative global market, according to Lux Research. The shale gas revolution had meant dirt cheap gas for U.S. companies and consumers, but the export infrastructure being built today could mean rising domestic cost as the global market balances. 

The global LNG trade has grown seven-fold since 2002 to $170 billion in 2012, and LNG infrastructure is the critical bottleneck preventing U.S. producers from accessing it -- but even as North America builds capacity, Australia is set to become another export rival. Strategically located to supply gas to energy-hungry markets like Japan, South Korea and China, Australia has $180 billion in current investments to add 3 trillion cubic feet per year of natural gas liquefaction capacity each year until 2017.

"If all the approved and proposed projects began operating at full capacity today, the U.S. could export nearly 30% of the gas it produces by 2020, creating a much more robust international market," said Daniel Choi, Lux Research Analyst and one of the lead authors of the report titled, "Navigating the Treacherous yet Lucrative LNG Sector."

"This would eliminate extremely low North American gas prices, hurting some domestic users, but would benefit the international economy overall," he added.

Lux Research analysts evaluated the impact of the shale gas boom on the growing global trade in LNG, and the infrastructure build-up across the world. Among their findings:

  • Global shale gas development threatens North America. North America enjoys huge reserves of shale gas and a head start in its development but many other countries are rapidly making progress. China has technically recoverable shale gas reserves of 32 billion barrels of oil equivalent (BBOE), and Argentina has even more at 161 BBOE.

  • LNG can replace diesel, but... LNG is targeted to replace diesel for a range of applications, mainly as a transportation fuel but also for off-grid power generation. In many countries, LNG prices are up to 25% lower than diesel prices but LNG has additional storage and distribution costs.

  • Novel business models are emerging. Companies such as REV LNG address high infrastructure costs for LNG by covering capex costs themselves and then charging customers between $2.50 and $2.80 per gallon of LNG, comparable to the price of diesel on an energy basis.

The report, titled "Navigating the Treacherous yet Lucrative LNG Sector," is part of the Lux Research Exploration and Production Intelligence and the Alternative Fuels Intelligence services.

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