How Viable Are LNG Plants At the Port of Brownsville When LNG Production Is Being Scaled Back Worldwide?

From the editor:  Short-sighted profiteers who push for LNG plants at the Port of Brownsville, extending to the city limits of Port Isabel, may be a decade or so late.  Lowered oil prices, lessening demand for LNG has resulted in lowered production worldwide.  

Actually, littering Highway 48 with LNG plants would be the dumbest mistake our region could ever make.  Imagine scenic Channel View adjacent to Houston.  The water is there, but the air wreaks of oil and the skies seem always overcast.  Certainly, no one is swimming or kayaking in the bay.

If the LNG plants are built, they could become a decaying carcass of chemical cleanup Cameron County could never afford, not only a permanent eyesore, but a health hazard.  

Hopefully, the LNG companies will honor the $4 million in leasing fees, but choose not to throw good money after bad.  Pope Francis, Barack Obama and the world are encouraging moving away from fossil fuel technology. Whole cities in Germany are now off the grid, powered by wind. 

World reports, many from LNG World News, the PR vehicle for the industry, indicate demand for LNG is decreasing.  Notice this report from Great Britain:

"Renewable Energy Association, UK’s renewable energy trade body reveals that Britain could be producing an equivalent of more than 45 LNG tankers’ worth of renewable natural gas (biomethane) per year by 2035.

According to the report, UK’s biomethane industry could be producing the equivalent of four LNG tankers worth of gas per year by the end of 2016.

Before the end of last year, 15 biomethane projects were completed with an additional 15 projects to be finished in 2016.

“By the end of 2016, the UK will be domestically producing more green gas than LNG imported at the Dragon (Milford Haven) terminal in 2014,” the reports shows.

With the expected growth rate by 2035, the UK’s production of biomethane will be 2.4 times greater than the volume of LNG that was imported by both the Dragon (Milford Haven) and Isle of Grain terminals in 2014.

This could mean that the United Kingdom could reduce its LNG imports by over a quarter compared to 2014 levels, the report shows. 

Indonesia is also lowering production:

"Indonesia’s two LNG plants could flood the spot market with up to 60 uncommitted liquefied natural gas cargoes in 2016.

Head of SKK Migas’ communications department Elan Biantoro said that the Tangguh and Bontang LNG facilities could end up with 55-60 uncommitted cargoes due to expiring contracts, Platts reports.

Cargoes, with a typical volume of 125,000 cbm, could be offered on the spot market by Pertamina and BP, however, Biantoro said that the domestic needs will have the priority while unused capacities will be offered via tenders.

Bontang facility, operated by Badak LNG, is also set to reduce the number of cargoes it produces in 2016. According to Badak LNG’s president director, Salis Aprilian Bontang LNG plant will produce 147 cargoes instead of 170 planned for 2015 due to lower gas production.(LNG World News)"

China is also reducing its LNG imports:

China’s weak natural gas demand cuts into LNG imports

07 October 2015 11:45 Source:ICIS

In the eight months to August, China’s LNG imports fell by 3.7% year on year to 12.8m tonnes as a slowing economy reduced domestic demand for natural gas.

Weak economic growth - which has reverberated around global markets - has caused China’s key industrial sector to reduce gas offtake. Many plants have either shut down or have reduced operating rates to cope with the thinning margins, a source at a state-owned major said.

“Everyone knows that China is oversupplied this year because of weak demand. State-owned importers have had to defer or divert a few term LNG deliveries,” a second market source said.

Last year, China imported 19.9m tonnes of LNG – equivalent to around 27.9 billion cubic metres (bcm). This year’s imports are unlikely to top this, barring a drastic change in weather.

Mild winter temperatures for two years running have meant little requirement for additional LNG imports beyond contract offtake, a source at a second state-owned major said. The same could happen again this winter.

A declining crude oil price this year has also made substitute products more affordable than natural gas.

ICIS China assessments for September showed that liquefied petroleum gas (LPG) in south China costs around yuan (CNY) 79.00/MMBtu ($12.43/MMBtu) on an ex-terminal truck basis, compared with CNY90.00/MMBtu for truck-delivered LNG.

“Those who cannot import LNG into China and can switch fuel usage would take LPG to improve their economics,” a private gas distributor in Guangdong said.

Domestic natural gas production was also more than sufficient to meet the requirements. The country produced 83.5bcm of natural gas from January to August this year, a 3.0% rise from the same period last year, data from the National Bureau of Statistics showed.

While the latest year-to-date consumption figure was unavailable, data from the National Development and Reform Commission (NDRC) showed that China consumed around 90bcm of natural gas in the first half of 2015. Although this would put it on track to reach last year’s total consumption of 179bcm, China had expected higher demand growth as it continues its push for greater clean energy usage.

State-owned major PetroChina expects a 2.6% growth in gas demand to 184bcm for 2015, and a rise to 300bcm by 2020, according to an industry report released by investment bank JP Morgan on 1 October.

“Many industry contacts see a mid-to-high single digit gas demand growth in the long term, especially if the government is serious about environmental measures and penetration of gas into China’s energy mix,” the JP Morgan report said. xieli.lee@icis.com
By Xieli Lee

Demand for LNG has weakened in all of Asia:

(EnergyAsia, January 15 2016, Friday) — Weighed down by a first decline in Asian consumption after years of strong growth, global demand for liquefied natural gas (LNG) fell two percent to 245 million tonnes last year, said UK consulting firm Wood Mackenzie.

A supply glut opened up as production rose by four million tonnes to 250 million tonnes in 2015 with the start-up of numerous planned projects.

The industry’s prospects will remain weak even with Asian spot prices crashing to a new low of US$6.90 per million BTU last year, said Wood Mackenzie as another 125 million tonnes of capacity is being developed in different parts of the world. The most anticipated project, the Sabine liquefaction terminal in Louisiana state, marking the US’s debut as an LNG exporter, will start up in February, according to owner and operator Cheniere Energy Partners LP.

LNG producers will continue to look to emerging markets to soak up the new supplies as established buyers are becoming more cautious, said Chong Zhi Xin, Wood Mackenzie’s principal analyst for South-Eastern Asia and Australia.

“In 2015, weak market environment forced companies to adjust strategies and tactics. Sellers started to look further afield to emerging markets in Middle East and Africa and new opportunities in Asia, while buyers exercised more caution in contracting,” he said.

The first LNG purchase tenders issued by Jordan, Egypt and Pakistan were met “with intense interest”, generating new demand totalling 5.8 million tonnes last year through fast-tracked floating storage and regasification unit (FSRU) developments.

Mr Chong said these new buyers have a crucial role in balancing the LNG market that is reeling from the loss of Asian demand. The FSRU market is expected to continue growing in 2016, enabling producers to supply to new customers.

Europe is another alternative outlet for suppliers struggling to deal with the protracted glut, according to Giles Farrer, Wood Mackenzie’s research director for global gas and LNG supply.

“The fall in Asian demand and the rise in Australian supply meant some Atlantic LNG volumes were squeezed out of the market and Atlantic-to-Pacific trade flows fell by 16% – from 96 million tonnes/year to 82 million tonnes/year,” he said. With the lower oil price driving down Asian LNG prices, the spread between European gas prices and Asian LNG prices narrowed.

As a result, companies with Atlantic supply sold their cargoes into European markets, said Mr Farrer.

Australia was responsible for the recent surge in LNG supply with the start-up of three major projects over the past year: BG’s QC LNG plant in January 2015, Santos’s GLNG in August 2015, and ConocoPhillips’s APLNG at the start of January 2016.

“The commissioning of these facilities, which have a combined capacity of 26.5 million tonnes/year, marks the start of (Australia’s) ascent to become the world’s largest supplier of LNG by 2019,” he said.

The US will add to at least 18.5 million tonnes of new supply capacity over the next few years with three projects gaining final investment decisions (FID) in 2015. Cheniere Energy approved the construction of two trains at Corpus Christi and a fifth train at Sabine Pass while Freeport LNG gave its FID greenlight on a third train.