Catching Cold or Catching Fire? Current state and growth prospects for small-scale LNG

The small-scale LNG market is rapidly growing on both the supply and demand side. Forecasts of growth to 2030 of up to 100 mt are widely shared, and there is a significant chance growth could far exceed this, with some forecasts for key sectors leading to a much higher overall demand.

SSLNG production and supply

Current SSLNG liquefaction capacity is estimated at 28mtpa. Supply infrastructure in terms of refuelling facilities for road and marine applications is becoming well established in China, and parts of Europe and North America, as well as some other markets around the world.

We expect small-scale liquefaction capacity to increase rapidly in coming years, particularly in markets where there is existing gas infrastructure and demand for LNG as a liquid fuel, or in areas where small-scale production provides an effective means of developing smaller gas resources. Small-scale liquefaction will face competition in LNG supplies from large-scale facilities, particularly regasification terminals. In addition, wider issues affecting the gas and LNG retail market in terms of the growth of LNG or alternative energy supplies from renewables or electric vehicles, will have a corresponding impact on small-scale liquefaction.

Algeria’s potential and challenges, striking the right balance

Algeria is facing a new crossroad as its political and socio-economic balance has become increasingly weakened by the consequences of the oil price collapse since 2014. Algeria is faced with stark choices, as illustrated by the interplay between its energy sector and its political & economic challenges and opportunities. Budgetary constraints are putting pressure on its key hydrocarbon industry, which was already suffering from years of underinvestment due to tough fiscal terms, challenging business climate and security risks.

The North African nation needs to intensify efforts to revive its oil and gas upstream sector with new projects, avert the long-term production decline at mature fields, whilst meeting growing domestic demand and honoring gas export commitments. The widening fiscal deficit and the rapid erosion of financial buffers since the oil price fell is further increasing the need for foreign capital to boost oil and gas reserves, amid growing competition with other producing nations to attract capital and technical know-how from international oil companies. But the lack of upstream investment is just one of the challenges facing Algiers in its energy sector and beyond.

Quarterly report – Natural gas prices

– In Asia, the average price of gas imports to Japan has risen since year-end 2017 in step with the uptrend in the oil price. LNG spot prices are under pressure and approaching those of oil-indexed contracts.

– These conditions have affected the European market, where price levels for Q2 and Q3 are relatively high.

– In the U.S., the Henry Hub price was lower in Q2 than Q1, due to the magnitude of U.S. natural gas output.

Globally, based on current information, average 2018 prices look to be up sharply in Europe (+36%) and Asia (+30-40%), but down in the United States (-3%).

Figure 1: 2017-19 gas price, by quarter: United Kingdom, Japan and the United States ($/MBtu and €/MWh)

Global trends