At a recent natural gas conference, some attendees indicated that international natural gas demand would continue to grow at a double-digit rate due to its availability, affordability, flexibility, and environmental benefits. This year the market has grown by 14 percent. But others believe that the near-term rate of growth will be more like 5 or 6 percent. While producers are expected to add 60 million tons of capacity over the next four years—less than the 100 million tons of capacity that they have added over the last three years—that level of supply is expected to be insufficient to meet demand.
Some believe that natural gas should be considered complementary to wind and solar power, which have no economic solution to their intermittency. Batteries are not economic today and batteries are not able to handle seasonal demand changes. Further, future environmental benefits of natural gas can be increased by the application of carbon capture and sequestration (CCS) technology.
Countries Add LNG Import Terminals
Germany
Germany, out of national security concerns, is expected to add four LNG import terminals over the next four years, significantly increasing Europe’s capacity to receive LNG. The projects, expected to be completed by 2023, would benefit national security if and when Russia should cut pipeline natural gas supplies. In 2009, a price dispute led to a nearly two-week disruption in Russian gas shipments through Ukraine, raising concerns about European reliance on Russian supplies. Germany is in partnership with the Russian company Gazprom to develop the Nord Stream 2 pipeline, which would transport Russian natural gas under the Baltic Sea to eastern Germany. In 2018, over half of Germany’s gas imports came from Russia. When the Nord Stream 2 natural gas pipeline is completed, projected at the end of this year, Russian imports could double.
The four LNG import terminals could receive 635 billion cubic feet of natural gas per year by 2023, which would boost Europe’s LNG import capacity by almost a third. Along Germany’s North Sea Coast, an LNG import terminal is planned in Brunsbuettel, another is planned in Wilhelmshaven, a third is planned at a site close to the city of Hamburg, and a small-scale LNG terminal is planned along the Baltic Sea in Rostock. Final investment decisions on the four projects are expected later this year. The natural gas is expected to help replace Germany’s coal plants that make up 40 percent of its electrical generation and are to be phased out by 2038.
India
India is one of the fastest growth markets for LNG and should soon become the second-largest LNG importer. India had four terminals receiving LNG last year, taking in 21 million to 23 million metric tons of LNG, up 10 to 13 percent from 2017 levels. Over the next seven years, the government plans to build another 11 terminals. India wants to increase the share of natural gas in its overall energy mix to 15 percent by 2030, from its current 6.2 percent.
India plans to build a new floating LNG import terminal with a 1 million metric ton a year capacity on its eastern coast, at the port city of Krishnapatnam, by 2022. The terminal will be India’s sixth LNG import facility. It will be built at an estimated cost of $208 million to $238 million with eventual plans to scale up the initial capacity to 3 million metric tons or 5 million metric tons. A floating terminal is faster and cheaper to build since it does not involve land acquisition issues.
India’s LNG demand is expected to increase by about 10 percent this year despite import capacity being added at a faster rate. Demand is less than capacity due to a lack of domestic pipelines to bring the gas to demand centers. Existing terminal capacity is 35 million metric tons a year, and additions and expansions are expected to increase it to 41.5 million metric tons by year end. India’s LNG demand is expected to grow to about 25 million to 26 million metric tons this year, putting terminal utilization at just over 60 percent at year-end. India plans to invest billions of dollars to extend its gas pipeline network across the country, constructing 14,000 kilometers of additional gas pipeline, hoping to operate all LNG terminals at full capacity by 2022.
Pakistan
Pakistan plans to build five LNG terminals as it wants to triple imports and ease natural gas shortages. The terminals should be in operation in two to three years. Pakistan has two LNG terminals currently with 1.2 billion cubic feet per day of capacity, and a third is expected to come on line next year adding 600 million cubic feet per day.
Five groups have been selected to build the terminals and they must submit plans by November 5, 2019. The cost of building the terminals and finding buyers for the gas will be up to the groups, and they will pay Pakistan a royalty based on volume. Pakistan will fund the construction of a $2 billion north-south pipeline to distribute the gas and storage facilities.
Conclusion
The global natural gas market is expected to increase tremendously in the near term, perhaps increasing at double digit rates. Many countries are building LNG import terminals, including Germany, India, and Pakistan that will increase their import capacity significantly, and in Germany’s case, provide for a secure supply of natural gas. The challenge will be for the supply side to gear up fast enough to fulfil the demand. The opportunities for the United States to play a role in these markets is huge, but would be aided by more timely construction of necessary infrastructure.
