source: Wood Mackenzie
Pennsylvania's contribution to the world LNG market in the short term will be gas shipped mainly from Marcellus and Utica development via new and existing pipeline capacity. Converted to LNG at Cove Point, it will potentially be one tenth of the amount that will initially be exported from the U.S., originating from the first liquefaction units being constructed now. Over time, new facilities could be considered and built, making Pennsylvania a bigger player on the world LNG stage. That said, there is an additional 140 million tons per annum (Mmta) of new LNG capacity being constructed globally and planned to enter service by 2020, so Pennsylvania's contribution, although significant, is not going to change the market as a whole.
As the U.S. rises to be a global LNG leader in the next several years, with over 65 Mmta of new capacity added, it will compete with other more established players in the LNG market, those being Australia, Qatar, Malaysia, Nigeria, and Trinidad and Tobago. Adding to the mix will be rapidly rising production in east Africa, Papua New Guinea, and new fields in the eastern Mediterranean. Iran is also being closely watched, as it has very large natural gas resources and the potential for the economic sanctions being lifted in 2016.
What the U.S. will potentially have to its benefit is low cost of production, flexible cargos, a tolling price model, and proximity to Europe. And with the opening of the expanded Panama Canal, 80% of the world's LNG carrier fleet will now be able to pass through its locks, giving Gulf Coast sourced LNG new price opportunities in Asian markets, as those buyers look to diversify the origins of their supply and pricing. These buyers would then have new supply not tied to Brent crude indexed LNG but the lower cost Henry Hub (U.S.) indexed natural gas.
(Next week, part three will look at the challenges in getting LNG to markets and the need for social license.)
Tom Murphy is Director of Penn State's Marcellus Center of Outreach and Research (MCOR). With 29 years of experience working with public officials, researchers, industry, government agencies, and landowners during his tenure with the Outreach branch of the University.
His work has centered on educational consultation in natural resource development, with an emphasis specifically in natural gas exploration and related topics. He lectures globally on natural gas development from shale, the economics driving the process, and its broad impacts including landowner and surface issues, environmental aspects, evolving drilling technologies, critical infrastructure, workforce assessment and training, local business expansion, resource utilization, financial considerations, and LNG export trends.
In his role with MCOR, Tom provides leadership to a range of Penn State's related Marcellus research activities and events. Mr. Murphy is a graduate of Penn State.