Houston (Platts)--20Feb2013/442 pm EST/2142 GMT

The US likely would build liquefaction capacity totaling 70 billion cubic meters/yr (6.77 Bcf/d) between 2016 and 2020, according to Goldman Sachs analysts.

The analysts, in a report issued late Tuesday, also predicted that 48 billion cu m/yr of liquefaction capacity would be added in Canada, as well as 21 billion cu m/yr potentially at a planned Mozambique project by 2022.

In 10 years, Goldman Sachs expects global liquefaction capacity to rise to 660 billion cu m/yr, from the current 400 billion cu m/yr, said the report, written by analysts Samantha Dart, Jeffrey Currie and Johan Spetz.

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"We maintain our view that global LNG balances will likely transition from 2015 into a softer market with the start up and subsequent ramp up of numerous liquefaction projects," it said. "However, we highlight that potential demand growth in the next 10 years, particularly from Asia, is likely to once again tighten spot markets, creating the necessary conditions to accommodate some [but not all] of the large liquefaction projects currently being proposed in North America."

Goldman Sachs said a number of factors could impact how much liquefaction capacity would be built, including the potential that the US Department of Energy would limit how much US LNG could be exported to countries that do not have free-trade agreements with the US, as well as uncertainty of the timing of liquefaction projects now being built and and the development of Mozambique's large offshore gas reserves.

Even if the US could build more than 70 billion cu m/yr of capacity, the global market would not need more than 80 billion cu m/yr of US liquefaction capacity in the next decade, Goldman Sachs said.

CHINESE SHALE GAS

Assuming that liquefaction plants now being built would come online beginning in 2015, LNG spot markets "will enter a bearish cycle in the 2016-2017 period, but subsequently transition into another bullish cycle from 2020," the analysts said.

Demand growth will be led by countries that are not members of the Organization of Economic Cooperation and Development, especially China and India, the report said. The OECD is an international trade organization that promotes democracy and free-market economies. Non-OECD countries would likely their LNG market share to 48% in 10 years and easily compensate for the expected decline in Japanese LNG demand as it restarts nuclear generation capacity that was taken offline after the March 2011 earthquake and tsunami, the report said.

However, the potential for shale gas development in China, as well as uncertainty over how much regasification capacity it would build, could restrain expected growth in Chinese LNG demand, the report said.

"For the moment, we remain relatively aggressive regarding our Chinese demand growth assumptions, but will continue to monitor China's progress on shale gas exploration and its plans for future regasification capacity," Goldman Sachs said.

Supply availability issues that have surfaced in Egypt, Algeria and Indonesia are likely to continue, the report said.

--Ron Nissimov, ron_nissimov@platts.com
--Edited by Richard Rubin, richard_rubin@platts.com

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