Certain consequences of sustained lower oil prices on the future of the LNG industry are already evident. Before the fall in oil prices, significant growth was projected: approximately 150 billion cubic meters (bcm) of LNG liquefaction capacity was under construction as of May 20141, up from 130 bcm in 2013, and as at March 2015, it was estimated that 200 bcm of capacity could be contracted before the end of the decade2.
As an example, since the slump in the oil price, a number of oil majors have pointed to negative implications for Canadian LNG developments. However, suggesting a positive longer term view, the British Columbian government has committed to a goal of three LNG facilities being in operation by 2020. In support of this, on February 19, 2015, then Prime Minister Stephen Harper announced federal tax breaks to spur economic activity that will be in effect for nearly 10 years for British Columbia’s nascent LNG industry.
Although an initial delay has been indicated for Mozambique LNG, the scale and size of the reserves has the potential to drive the project forward, especially as Mozambique is strategically located to access the Indian market and other LNG import emerging markets. The recent 30 trillion cubic feet (tcf) gas discovery by ENI in the Zohr field, offshore Egypt, is significant for the industry and although current agreements indicate that the gas will be for Egyptian domestic use only, this is another project in support of a positive outlook for LNG development.
Other potential LNG export projects, at earlier stages in the development process, appear to be continuing and by the time they come to take a final investment decision (FID), the oil price and forward price curves may have recovered sufficiently to enable such projects to move into construction without delay.