LNG regas capacity is outstripping new liquefaction plant at a rapid rate
The ratio of regasification capacity to LNG liquefaction is set to grow rapidly over the next five years.
OECD Asia's share of world regasification capacity could shrink from over 50% now to less than 20% in only five years. Contrary to expectations, building LNG import capacity may not result in enhanced security of supply, rather power is shifting upstream to a small band of major producers.
Consumption of gas has grown fast and marginal demand is dependent on the supply of imported coal and oil.
LNG regasification capacity is streaking ahead of increases in liquefaction plant, according to data compiled by Platts LNG Daily's terminal and liquefaction plant trackers.
Based on existing capacity, terminals under construction, approved or that have applied for approval, world regasification capacity will end 2008 at 448.2 Bcm a year.
Liquefaction capacity will rise to 254.1 Bcm/yr or 191.5 million tons/yr, giving a ratio (see chart) of 1.76 Bcm/yr regasification capacity for each one Bcm/yr of liquefaction.
By 2013, based on the same criteria, liquefaction capability will have increased to 419.1 Bcm/yr as opposed to world regasification capacity of 1,351.55 Bcm/yr, a ratio of 3.22 to 1.
There are in addition a huge number of projects on both the supply and demand side that are at the proposal stage. On the liquefaction side, there are an additional 54 project proposals worldwide, while on the regasification side there are 91 projects proposed.
Recent rises in the price of spot LNG cargoes, close to $20/MMBtu, reflect Japan's dominant position in the LNG market.
Owing to its lack of domestic energy resources, and early adoption of LNG, the country currently accounts for 40.1% of world regasification capacity (see chart).
Japan has both the money and infrastructure to absorb spot LNG, if it needs to do so. Having negligible domestic gas production, Japan's marginal LNG demand is heavily influenced by the availability of alternative energy supplies, rather than the supply/demand balance of competitive local gas markets.
In January, cold weather pushed Japanese power consumption to record levels at the same time as a major proportion of the country's nuclear fleet was off line.
Most notably, Japan's largest utility, the Tokyo Electric Power Company, had two-fifths of its 17.31 GW nuclear capacity out of action, owing mainly to an earthquake which hit its 8.21 GW Kashiwazaki-Kariwa nuclear plant in July 2007.
Japan has plans to build more gas-fired power plant and convert others to natural gas from coal and oil, indicating that its demand for gas will rise in future.
According to data from Japan's Federation of Electric Power Companies, the country has total LNG-fuelled plant capacity of about 54 GWs, or just over 20% of total power generating capacity, while around 27.3 GWs is coal-fired with a further 34 GWs accounted for by heavy fuel oil or direct-run crude oil.
Japan has relatively few plans to increase its regasification capacity. Only one new terminal has been approved, which should add 4.5 Bcm/yr capacity in 2010, although a further four projects are at the proposal stage.
South Korea is in a similar position. With little domestic gas production, it is the world's second largest importer of LNG after Japan.
Consumption of gas has grown fast and marginal demand is dependent on the supply of imported coal and oil, as well as nuclear capacity.
South Korea accounts for 12.6% of world regasification capacity, but despite growing gas demand has no new terminals planned, with the exception of one project at the proposal stage with capacity of just 2 Bcm/yr.
Together, Japan and South Korea make up just over half of the world's total regasification capacity. Import data suggests that terminal utilization runs at an average of about 50%-60%, indicating that the lack of new construction is no barrier to increases in LNG imports over the next five years.
Nevertheless, based on forecasts of new construction around the world, Japan and South Korea will face more competition and soon. Their combined proportion of regasification capacity is expected to shrink dramatically from 53.5% now to just 18.1% by 2013.
Next page: LNG consumption drifts towards the Atlantic
Created: March 12, 2008
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