BC

$10 billion Nisga'a-led LNG project gets green light to enter environmental review

Eva Clayton, president of the Nisga’a Nation, said the sooner the hydro power grid can be upgraded to help electrify LNG projects the better

Author of the article:Gordon Hoekstra
Published Mar 19, 2023 • 

Eva Clayton, president of the Nisga’a Nation. 

PHOTO BY SEAN KILPATRICK /The Canadian Press


The Nisga’a-led $10-billion Ksi Lisims LNG project has been given the greenlight to enter the province’s environmental review process.

The decision on the export facility in northwest B.C. was announced by the B.C. Environmental Assessment Office last week, just days after the B.C. government gave final approval to the $2.4-billion Haisla Nation’s Cedar LNG project.

The Nisga’a’s project partners include a consortium of Canadian gas producers, Rockies LNG, and Houston, Tex.-based Western LNG.

The decision on Ksi Lisims kicks off a process that will set out how the review will take place, including the federal government’s role, and what will go into a final application and decision. The assessment process could take up to 18 months or more.

The recent LNG announcements highlight the increasing Indigenous involvement in major resource projects in B.C., and the benefits that can flow from the projects to First Nations.

But the prospect of more liquefied natural gas projects — which tap into B.C.’s vast northeast natural gas reserves for export to overseas markets — also raises significant questions on how the B.C. government will reach its legislated greenhouse gas emission targets.

Both projects tout themselves as achieving “net-zero” emissions, in part, by tapping into the B.C. Hydro’s power grid, but critics, which include First Nations, note the project will also increase emissions with increased natural gas extraction in northeast B.C.

Eva Clayton, president of the Nisga’a Nation, said the sooner the hydro power grid can be upgraded to help electrify LNG projects the better.

Without electricity, LNG plants, which liquefy gas for transport on ships, use the gas itself to power the equipment and significantly increases GHG emissions.

“I am pleased to see Premier (David) Eby’s remarks about the new LNG framework recognizing what we have long known: that economic reconciliation and net-zero LNG development go hand in hand,” Clayton said in a written statement.

Following approval of Cedar LNG last week, Eby announced a new strategy that will put a cap on all emissions from the oil and gas sector including from LNG production. It is meant to ensure B.C. meets its 2030 emissions reduction target for the sector.

He rejected the premise that responding to the climate crisis means always saying no to projects.

B.C. has targeted reducing GHG emissions by 40 per cent by the end of the decade over levels in 2007. However, emissions have been reduced just one per cent.

Ksi Lisims LNG estimates that if its facility is electrified annual GHG production would be under 200,000 tonnes a year, 0.3 per cent of B.C.’s annual emissions.

Without electrification, or if construction of the needed 95-kilometre power line is delayed, emissions would be up to 1.9 million tonnes a year, or nearly three per cent of annual emissions.

Those emissions would be in addition to millions of tonnes from the Cedar LNG project and the much larger LNG Canada, which is expected to be in operation in 2024.

While some First Nations in northwest B.C. have been supportive of the Ksi Lisims project, the Lax Kw’alaams has called for the environmental assessment application to be terminated.

“The project would induce the breach of B.C.’s legislated climate targets and would cause extraordinarily adverse effects to Lax Kw’alaams rights as proposed,” the First Nation said in a letter to the assessment office this month.

Environmental groups have long cited concerns that LNG projects will prevent B.C. from hitting its climate targets.

Wilderness Committee climate campaigner Peter McCartney said it’s impossible to keep approving new climate pollution and meet GHG emission reduction targets.

“The province has very clear commitments to reduce its greenhouse gas emissions, which these facilities are going to make it much harder to do, whether they’re led by First Nations or not,” observed McCartney.

ghoekstra@postmedia.com

B.C. sets high emissions bar for new LNG projects

March 17, 2023Reuters

British Columbia’s decision this week to toughen emissions standards for new liquefied natural gas (LNG) projects creates one of the most robust climate plans in North America, but sets a high hurdle for the industry even as many countries look to Canada to become a global supplier of gas.

As part of a new energy action framework, the western Canadian province will require proposed LNG projects that are going through or entering the environmental assessment process to have a credible plan to be net-zero emissions by 2030.

While the tougher regulation will not impact the huge Shell-led LNG Canada project already under construction, a proposed export terminal adjoining the small-scale Tilbury LNG facility and the early-stage Ksi Lisims LNG project in northern B.C. will fall under the new rule.

Canada is the world’s sixth-largest gas producer and its west coast LNG industry has seen revived interest as the world tries to secure alternatives to Russian gas supply following the invasion of Ukraine.

The province will start exporting 14 million tonnes per annum (MTPA) when LNG Canada enters service in 2025.

“That (net-zero requirement) is a very high bar and a high hurdle to pass,” said Mark Zacharias, executive director of think-tank Clean Energy Canada, adding the new framework rounds out B.C.’s plan to cut emissions 40% below 2005 levels by 2030.

“The B.C. roadmap to 2030 is probably North America’s strongest climate plan but what was missing until now was answers on dealing with oil and gas. This fills in the missing gaps.”

Ksi Lisims, proposed as a 12-MTPA plant, will achieve net zero through a fully electrified facility that utilizes renewable hydropower and carbon offsetting, spokesperson Rebecca Scott said.

FortisBC, one of the companies behind the Tilbury Marine Jetty project, said it welcomed the clarity the framework provides for LNG development and “looked forward to engaging with the government” on the 2030 guidelines.

B.C. released its energy action framework alongside a positive environmental assessment for the C$3-billion ($2.2 billion) Cedar LNG project, a joint venture between Haisla First Nation and Pembina Pipeline Corp.

The province said it will sign an agreement with the Haisla Nation to explore ways to lower emissions to near zero by 2030.

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OIL AND GAS CAP

B.C.’s new regulations also include an oil and gas emissions cap and plans to accelerate the electrification of the economy.

Tristan Goodman, CEO of the Explorers and Producers Association of Canada, said the framework is generally “constructive and positive”, but the industry had some concerns about how the cap would be implemented.

“The message from the province is ‘We believe we can develop natural gas and move forward broadly on Indigenous reconciliation while also meeting out climate ambitions’,” Goodman said. “That’s good, but the concern lies in the details.”

TC Energy, which is building the Coastal GasLink pipeline that will supply LNG Canada and Cedar LNG, said in a statement on Wednesday it was “carefully reviewing” the framework.

Cedar LNG Receives B.C. Environmental Approval and Signs Memorandum of Understanding with ARC Resources Ltd.

'This Is Terrifying': Explosion at Texas Gas Plant Spotlights Threat of LNG Industry

"We shouldn't have to live in fear just so gas executives like Michael Smith can get rich," said one local resident, referring to Freeport LNG's CEO.


Surveillance footage captures the explosion at the Freeport LNG plant on Quintana Island in Texas on June 8, 2022. (Photo: Quintana Beach County Park/Facebook)

JAKE JOHNSON

June 9, 2022

An explosion at a major liquefied natural gas plant in Texas on Wednesday heightened fears of pollution and other impacts in nearby communities—and served as the latest example of the threat the booming LNG industry poses to the climate.

"Freeport LNG really doesn't care about us. This is not the first fire."

The blast at Freeport LNG's export terminal on Texas' Quintana Island was reported around noon local time, and no injuries have been disclosed. Authorities said the fire and "release" from the explosion were swiftly contained and that an investigation into the cause is underway, but local residents voiced concern that they're going to be kept in the dark.

"This is terrifying," said Melanie Oldham, founder of Citizens for Clean Air and Clean Water in Brazoria County, where the Freeport LNG facility is located. "We've been afraid of a disaster happening ever since Freeport LNG started exporting gas. We shouldn't have to live in fear just so gas executives like [company CEO] Michael Smith can get rich."

"This is dangerous business," Oldham added. "What kind of air monitoring are they doing out there? Will they even be able to tell what the explosion released? And will they tell us? Thankfully it looks like none of the workers or anyone else was injured or killed. We may not be so lucky the next time there's an explosion at this plant, or any of the polluting facilities surrounding us, for that matter."

Surveillance video footage posted to Facebook by Quintana Beach County Park appears to show the first moments of the explosion, which reportedly shook nearby buildings.

"I saw it blow up from my job site—biggest fireball I've ever seen," said one Freeport resident.

The facility, one of the largest LNG export plants in the United States, is expected to shut down for at least three weeks in the wake of the explosion and fire, injecting further chaos into global energy markets already roiled by Russia's war on Ukraine.

One industry analyst told Reuters that the temporary shutdown will likely take 1 million tonnes of LNG off the market.

But Harold Doty, who lives on Quintana Island, warned that "there is still no emergency action plan for that plant" despite Wednesday's explosion.

"Originally, the plant said that people on the island should go to the beach and have the Coast Guard pick them up in boats," said Doty. "Freeport LNG really doesn't care about us. This is not the first fire. There are often fire alarms at the plant that I can hear from my house. I can never get any explanation when I call, so I've quit calling."

The explosion came as U.S. LNG exports to Europe are surging as part of the Biden administration's plan to help E.U. nations wean themselves off Russian fossil fuels. According to federal data released this week, U.S. LNG exports averaged 11.5 billion cubic feet per day during the first four months of this year, an 18% jump compared to the 2021 annual average.

While the fossil fuel industry often characterizes LNG as a more climate-friendly alternative to coal and other dirty energy sources that are driving global warming, environmentalists stress that LNG is a major emitter of methane—a greenhouse gas roughly 80 times more potent than carbon dioxide.

"In the United States, natural gas accounts for more than one-third of carbon emissions and almost half of methane emissions," notes Marisa Guerrero of the Natural Resources Defense Council.

In a statement Wednesday, Citizens for Clean Air and Clean Water in Brazoria County and the Texas Campaign for the Environment said that "the oil and gas industry has been benefiting from an 'export boom' that is sending gas and crude oil overseas in record amounts, but has resulted in leaks, explosions, and wrecked communities back home—from flaring and pollution in the Permian Basin to explosions like the one today on Quintana Island."

"Officials rarely disclose the contents of the tanks that explode, leaving local residents to just have to wonder whether or not they are in danger," the groups continued. "The boom is also jeopardizing global climate agreements, as the window to rein in emissions is closing."

Freeport LNG Fire Cuts Key Source Of U.S. Gas Supply To Europe, Asia

By Marwa Rashad
06/09/22 

Model of LNG tanker is seen in front of the EU flag in this illustration taken May 19, 2022. 

 Photo: Reuters / DADO RUVIC

By Marwa Rashad

LONDON (Reuters - An at least three-week shutdown at Freeport LNG, operator of one of the largest U.S. export plants producing liquefied natural gas (LNG), is expected to delay cargoes to Europe, further stressing the continent's drive to phase out Russian gas.

The outage at the plant, which provides around 20% of U.S. LNG processing capacity, began with an explosion at its Texas Gulf Coast facility on Wednesday. It has triggered alarm bells among players in market already struggling with reduced Russian supplies and resurgent demand in Asia.

The plant historically sent most of its cargoes to Japan and Korea, but the outage will affect Europe, which has been pulling U.S. cargoes from the east because of the higher prices. Russia's invasion of Ukraine - actions that Moscow calls a "special military operation" - shifted flows to Europe from Asia.


A three-week shutdown will mean the loss of around 13-15 cargoes, although Europe should be able to make up its losses from gas storage. But the risk remains if the shutdown extends for a longer period, said analysts.

"An outage for three weeks minimum is a loss of around 940,000 tonnes of LNG. If you took an average cargo size around 70,000 tonnes, that's about 13 cargoes," said Alex Froley, LNG analyst at data intelligence firm ICIS.

The outage coincides with Nord Stream 1 maintenance and some Norwegian gas maintenance measures; however the market might be able to deal with it by withdrawing some volumes from storage potentially, said a person familiar with the market.

"If the outage lasts months rather than weeks, the total loss can be much greater, and Europe's more comfortable inventory situation will not be quite as reassuring. We would then expect the strong European LNG price premium over Asia to return," said Tamir Druz, managing director at Capra Energy.

The news has initially sent U.S. natural gas futures down as much as 14% as traders anticipated the outage would free up supplies and help rebuild U.S. storage for winter demand.

However, prices recovered later on Thursday and were up about 2% as the market focused more on high air conditioning demand from a heatwave blanketing parts of the United States, especially Texas. [NGA/]

In Europe, gas prices rose by up to a fifth on Thursday morning on fears lost U.S. shipments would stress a market already struggling with reduced Russian supplies. Prices cooled off at the market close. [NG/EU]

Japan-Korea-Marker (JKM) prices - which are widely used as a benchmark for Asian LNG - also rose, with The Platts JKM LNG assessed at $23.486 per metric million British thermal units (mmBtu) on Thursday, an increase of $1.694, or 7.8%, from the previous day.

FREEPORT'S BUYERS

BP, TotalEnergies, Osaka Gas, Japan's biggest power generator JERA and South Korea's SK Gas Trading are listed as the buyers of Freeport LNG cargoes, industry sources said. BP has the largest contract at 4.4 million tonnes per annum through 2040.

Japan typically imports 6-7% of its total LNG supply from the United States during June, with LNG from Freeport accounting for at least half of the volume, said Kpler gas and LNG analyst Ryhana Rasidi.

South Korea has imported an average of about 20% of its LNG from the United States in June over the last two years. It could potentially lose at least 0.13 million tonnes of LNG, about 17% of its consumption, from the facility, she said.

In March, 21 cargoes loaded at the Freeport facility, carrying an estimated 64 billion cubic feet of gas to destinations in Europe, South Korea and China, according to the U.S. Department of Energy. That was up from 15 cargoes in February and 19 in January.

Around 70% of Freeport's monthly supplies in the past few months went to the European Union and Britain. France, Britain, Turkey and the Netherlands have been the biggest European importers from Freeport LNG this year, industry sources said.

"Of 14 Freeport cargoes arriving at destinations in May, 10 of them went to Europe, two to Asia and two to the Americas." Froley said. (Graphic: Freeport exports by destination -

US now world’s top LNG exporter, as Europe boycotts cheaper Russian gas

The USA has rapidly become the world’s biggest exporter of liquefied natural gas (LNG), tied with Qatar. Europe replaced Asia as the top market for US LNG in 2022, boycotting cheaper Russian energy over the proxy war in Ukraine.

By  Ben Norton




The United States has rapidly become the world’s biggest exporter of liquefied natural gas (LNG), tied with Qatar.

A significant reason for this meteoric increase is because Europe replaced Asia as the top market for US LNG in 2022, as Brussels pledged to boycott Russian energy over the proxy war in Ukraine.

Among the principal importers of US LNG are France, Spain, Britain, the Netherlands, and Italy.

Europe is now paying significantly more for expensive US LNG than it had previously for Russian pipeline gas.

As of 2022, Europe had the highest energy prices on the planet. This was a key factor in fueling an inflation crisis that spread worldwide, and hit Europe especially hard.

Bloomberg reported that the “US tied Qatar as the world’s top exporter of liquefied natural gas” in 2022, calling it “a milestone for the meteoric rise of America as a major supplier of the fuel.”

The outlet added that the United States, “which only began exporting LNG from the lower-48 states in 2016 and has seemingly overnight become a dominant force in the industry.”

A graph from the Energy Information Administration (EIA) illustrates the monumental shift in US LNG exports in just six years.



S&P Global reported in September 2022 that European imports of LNG made up the “lion’s share” of US exports in the first six months of 2022.

Global imports of US LNG nearly doubled from $10.8 billion in the first half of 2021 to $21.2 billion in same period in 2022.

“Many U.S. LNG export cargoes departed for Europe in the first half of 2022 as the war in Ukraine prompted a scramble for LNG supplies,” S&P Global wrote, adding that “LNG market experts have warned that shipments of LNG cannot quickly replace curtailed pipeline imports from Russia and that the region’s need for significant LNG volumes will remain strong.”

The market intelligence unit stressed that Europe has the highest gas prices on Earth. Its benchmark energy price hit a historic high of roughly €320 per megawatt hour in August.

S&P Global followed up with another report in November, stating that the “European energy crisis has put US natural gas in high demand and in a position of acute geopolitical relevance.”

The financial information firm used the same language, that the “lion’s share headed to Europe following Russia’s invasion of Ukraine in February” and the escalation of the NATO-Russia proxy war.

The industry monitor LNGPrime reported that France, Spain, the Netherlands, Japan, and Italy bought nearly half (46.4%) of total US LNG exports in May 2022.

Reuters noted in December 2022 that US LNG prices had approximately doubled in the previous year. It added that US LNG exports to Europe increased by a staggering 137% in the first 11 months of 2022, compared to 2021.

The news wire added that “the United States will remain the primary supplier of LNG to Europe for at least 2023. This will likely generate even greater revenue for U.S exporters after a record 2022, which totaled $35 billion through September, compared to $8.3 billion over the same period in 2021.”

This massive spike in energy prices is causing economic chaos in Europe. Politico published an article in November 2022 titled “Why cheap US gas costs a fortune in Europe.”

It pointed out that US LNG is almost four times more expensive in Europe. And it is not just North American corporations that are profiting from this substantial markup, but also European importers and resellers.

Even France’s right-wing President Emmanuel Macron, a former investment banker, complained to French industrial executes, “In today’s geopolitical context, among countries that support Ukraine there are two categories being created in the gas market: those who are paying dearly and those who are selling at very high prices… The United States is a producer of cheap gas that they are selling us at a high price… I don’t think that’s friendly.”

Politico added, “Macron’s dig conveniently ignored that the largest European holder of long-term U.S. gas contracts is none other than France’s own TotalEnergies.”

In 2018, the CEO of Austrian fossil fuel company OMV estimated that Russian pipeline gas was 50% cheaper than US LNG. The corporate executive, Rainer Seele, said, “I think it is about 50% difference between LNG and Russian gas.”

Freeport LNG Restart And $2 Natural Gas Put This LNG Giant's Earnings Beat In Focus

KIT NORTON
02/23/2023

Cheniere Energy (LNG), the largest U.S. exporter of LNG, topped fourth-quarter financial estimates early Thursday. The report lands as a volatile natural gas market has gas prices at their lowest levels since 2020, and as Freeport LNG, a key U.S. liquefied natural gas export facility, prepared to end an eight-month pause in exports. Cheniere Energy stock surged Thursday.

Cheniere Energy reported $9.08 billion in Q4 revenue, up 38% from last year, with EPS of $15.78. Ahead of earnings, analysts forecast EPS of $6.02, up from a loss of $5.22 a year ago.

Cheniere's Revenue Doubles

This was the second consecutive quarter Wall Street predicted booming profits for Cheniere Energy. In Q3, LNG reported a net loss of $9.54, sharply below analysts expectations for a profit of $5.58 per share. Analysts expected Cheniere Energy Q4 revenue to increase 22% to $8.03 billion.

The Houston-based company is the largest producer of liquefied natural gas in the U.S. and one of the largest LNG operators in the world. Its services range from gas procurement and transport to vessel chartering and delivery. Cheniere owns and operates liquefied natural gas terminals near Corpus Christi, Texas.

For the full year, Cheniere earned $5.64 per share, up from a loss of $9.25 in 2021.

 Meanwhile, Cheniere revenue more than doubled to $33.43 billion in 2022.

Cheniere Energy stock soared 9.1% t0 161.31 Thursday during market trade. On Wednesday, LNG shares edged up 2.7% to 147.77. The stock is now trading more than 19% above an early January low, in a consolidation begun in November.

LNG shares rank 36th in IBD's Oil & Gas-Transport/Pipeline industry group. The group ranks No. 38 among the 197 industry groups tracked by IBD. Cheniere Energy stock has a 39 Composite Rating out of 99. The stock also has a 51 Relative Strength Rating. The EPS Rating is 24 out of 99.

Natural Gas Below $2

Natural gas futures prices rose modestly Thursday, after sliding on Wednesday below the $2 per million British thermal units. That was the first undercut of the $2 mark since September 2020. Natural gas prices have declined more than 45% since the beginning of 2023 and are down around 80% from their August, 2022 peak of $10.

The latest Energy Information Administration data also shows U.S. natural gas stockpiles are at 2.266 billion cubic feet. This is up 17% compared to last year and nearly 9% above the five-year average. Meanwhile, the amount of natural gas flowing to U.S. LNG export plants rose to a 10-month high last week, according to the EIA.
Freeport LNG Is Back

U.S. gas supplies started to back up after an explosion and fire shut down Freeport LNG's Quintana, Texas export facility on June 8. The loss of export capacity led to a gas price peak in August, after which prices veered into a steep slide.

On Tuesday, the privately held Freeport said regulators approved the restart of commercial operations.

The Federal Energy Regulatory Commission gave Freeport LNG permission to restart two of three liquefaction trains, which compress natural gas into condensed, super-chilled liquid. Freeport LNG expects to increase production to 2 billion cubic feet per day (bcf/d) — about 15% of total U.S. LNG export capacity — over the "next several weeks."

However, the facility's third liquefaction train still requires regulatory authorization before it can be brought back online. The first LNG production and ship loading from the facility began on Feb. 11, Freeport LNG reported Tuesday.

"Returning to liquefaction operations is a significant achievement for Freeport LNG," CEO Michael Smith said in a statement.

The unexpected shutdown of the facility reduced U.S. LNG exports, and caused a sudden loss of demand for natural gas. That, in turn, left surplus gas on the U.S. market, allowing U.S. utilities to inject higher-than-expected reserves into stockpiles for the winter.

Freeport repeatedly pushed back its timeline to resume operations. The impact of the facility's restart on natural gas markets, demand and prices is not clear.

U.S. Poised To Become Top Exporter

The U.S. is set to become the largest LNG exporter in 2023, according to a new report from U.K.-based Wood Mackenzie. In 2022, the U.S. was the third-largest exporter of LNG with 76.4 million metric tons per annum. The resumption of Freeport LNG's facility positions the U.S. to export 89 million metric tons this year, surpassing Qatar and Australia, according to Wood Mackenzie.

Based on the combination of projects already under construction and momentum of potential projects, U.S. LNG capacity could grow between 70 million metric tons per annum-190 million metric tons per annum before the end of the decade.

LNG Carrier Shipbuilding Risks Stranded Assets Due to Climate Policies

Risk for stranded assets is high due to the rate of LNG carrier construction and climate change policies (file photo)

PUBLISHED MAY 25, 2023 4:46 PM BY THE MARITIME EXECUTIVE

 

The rapid growth in LNG shipbuilding responding to the demand for gas transport is raising the likelihood of creating stranded assets writes Climate Analytics, a climate science and policy institute, in a newly released report entitled “High and Dry: The global energy transition's looming impact on the LNG and oil shipbuilding industry.” Partnering with South Korean climate and energy advocacy group Solutions for Our Climate, the report highlights the risk of overshooting LNG shipping capacity which is increased by future energy scenarios that call for the rapid elimination of fossil fuels.

“This report finds that the uptake in shipping capacity far exceeds global forecasts for the LNG trade as the world transitions away from fossil fuels,” writes Victor Maxwell and Nandini Das as co-authors of the report. The report calls for Korea and other shipbuilding countries to redirect public finance currently subsidizing fossil fuels, including shipbuilding activities, toward clean energy. Doing so they write would avoid stranded asset risk and delivery a transition for the shipbuilding industry away from its focus on gas carriers and crude oil tankers.

The orderbook for LNG carriers grew to record levels in 2022, with the authors citing the oil and gas industry’s “dash for LNG following Russia’s invasion of Ukraine.” While the war and the embargoes on Russian energy shifted demand to make up for the lost supplies, producing nations have also been rushing to increase capacity and LNG exports. Producers are expanding their facilities in the United States as nations such as China rapidly increase imports while Qatar is in the final phase of a long-term expansion project to open its new North Field which is expected to double the country’s exports.

The report analyzes the outlook for LNG carrier and oil tanker shipbuilding using a variety of scenarios in the efforts to slow global warming. They point out that these ship types in the five years between 2016 and 2020 accounted for 27 percent and 10 percent of shipbuilding globally. 

They calculate that at the end of 2021, there were around 700 LNG ships. However, they highlight the rapid growth in 2022 saying that 34 LNG carriers were added last year and a further 335 LNG carriers are expected to deliver between 2023 and 2028, according to data from Clarkson Research.

They further highlight that the South Korean shipbuilding industry is heavily dependent on LNG carriers. Along with tankers they said these ships rank among South Korea’s top ten exports in terms of value. In 2022, Korean shipbuilders won over 70 percent of the orders for LNG carriers, representing 65 percent of the tonnage order from the country’s shipbuilders. The market for VLCCs has been slower based on the downturn in the oil markets but rebounded since mid-2022 as analysts predicted the beginning of a prolonged upcycle in the oil market.

The report highlights that shipowners are also continuing to explore further LNG carrier orders. They cite reports that QatarEnergy is in discussions with the South Korean shipbuilders for a further order of up to 40 LNG carriers for delivery by 2027. TotalEnergies is also reported in discussion for an order of 17 LNG carriers to support its resumption of the Mozambique LNG project.

“If built, the global LNG shipping capacity will further exceed IEA’s forecast of LNG trade,” the report warns. “This poses a particular risk for financial institutions that provide loans and underwriting to the capital-intensive shipbuilding industry.”

They conclude that any decline in the market for these ships will have a significant impact on the sector and broader implications for shipbuilding nations. Given the traditional economic lifespan for ships versus the timelines for cutting and eliminating fossil fuel use, the report highlights the potential for creating stranded assets among the current class of newbuilds. They call for shipbuilders and their nations to prepare for these changes highlighting the heavy dependence on oil tanker and gas carrier construction creates a likelihood for a fundamental crisis.

 

LNG Carrier Shipbuilding Risks Stranded Assets Due to Climate Policies

Risk for stranded assets is high due to the rate of LNG carrier construction and climate change policies (file photo)

PUBLISHED MAY 25, 2023 4:46 PM BY THE MARITIME EXECUTIVE

 

The rapid growth in LNG shipbuilding responding to the demand for gas transport is raising the likelihood of creating stranded assets writes Climate Analytics, a climate science and policy institute, in a newly released report entitled “High and Dry: The global energy transition's looming impact on the LNG and oil shipbuilding industry.” Partnering with South Korean climate and energy advocacy group Solutions for Our Climate, the report highlights the risk of overshooting LNG shipping capacity which is increased by future energy scenarios that call for the rapid elimination of fossil fuels.

“This report finds that the uptake in shipping capacity far exceeds global forecasts for the LNG trade as the world transitions away from fossil fuels,” writes Victor Maxwell and Nandini Das as co-authors of the report. The report calls for Korea and other shipbuilding countries to redirect public finance currently subsidizing fossil fuels, including shipbuilding activities, toward clean energy. Doing so they write would avoid stranded asset risk and delivery a transition for the shipbuilding industry away from its focus on gas carriers and crude oil tankers.

The orderbook for LNG carriers grew to record levels in 2022, with the authors citing the oil and gas industry’s “dash for LNG following Russia’s invasion of Ukraine.” While the war and the embargoes on Russian energy shifted demand to make up for the lost supplies, producing nations have also been rushing to increase capacity and LNG exports. Producers are expanding their facilities in the United States as nations such as China rapidly increase imports while Qatar is in the final phase of a long-term expansion project to open its new North Field which is expected to double the country’s exports.

The report analyzes the outlook for LNG carrier and oil tanker shipbuilding using a variety of scenarios in the efforts to slow global warming. They point out that these ship types in the five years between 2016 and 2020 accounted for 27 percent and 10 percent of shipbuilding globally. 

They calculate that at the end of 2021, there were around 700 LNG ships. However, they highlight the rapid growth in 2022 saying that 34 LNG carriers were added last year and a further 335 LNG carriers are expected to deliver between 2023 and 2028, according to data from Clarkson Research.

They further highlight that the South Korean shipbuilding industry is heavily dependent on LNG carriers. Along with tankers they said these ships rank among South Korea’s top ten exports in terms of value. In 2022, Korean shipbuilders won over 70 percent of the orders for LNG carriers, representing 65 percent of the tonnage order from the country’s shipbuilders. The market for VLCCs has been slower based on the downturn in the oil markets but rebounded since mid-2022 as analysts predicted the beginning of a prolonged upcycle in the oil market.

The report highlights that shipowners are also continuing to explore further LNG carrier orders. They cite reports that QatarEnergy is in discussions with the South Korean shipbuilders for a further order of up to 40 LNG carriers for delivery by 2027. TotalEnergies is also reported in discussion for an order of 17 LNG carriers to support its resumption of the Mozambique LNG project.

“If built, the global LNG shipping capacity will further exceed IEA’s forecast of LNG trade,” the report warns. “This poses a particular risk for financial institutions that provide loans and underwriting to the capital-intensive shipbuilding industry.”

They conclude that any decline in the market for these ships will have a significant impact on the sector and broader implications for shipbuilding nations. Given the traditional economic lifespan for ships versus the timelines for cutting and eliminating fossil fuel use, the report highlights the potential for creating stranded assets among the current class of newbuilds. They call for shipbuilders and their nations to prepare for these changes highlighting the heavy dependence on oil tanker and gas carrier construction creates a likelihood for a fundamental crisis.

The Four Key Reasons Why The U.S. Will Never Stop Targeting Russia’s LNG Sector

• 
  
• By Simon Watkins - Apr 29, 2024
• 
  
• LNG has become the most important swing energy source in an increasingly insecure world.
• 
  
• Energy exports remain the foundation stone of Russia’s essentially petro-economy.
• 
  
• Russia's LNG industry is closely associated in Russia with President Vladimir Putin personally.

Perhaps even more than its targeting of Russian oil exports, the U.S. has been laser-focused on its liquefied natural gas (LNG) sector as they key area it wants to effectively destroy over the long term. Last week’s suspension of Russia’s flagship Arctic LNG-2 project by lead operator Novatek is the latest of Washington’s trophies in this regard, but it is very unlikely to be the last. As U.S. Assistant Secretary of State for Energy Resources Geoffrey Pyatt said on 24 April: “[Novatek] has recently had to suspend production at its Arctic LNG-2 liquefaction facility, in part because of sanctions that the Biden administration has led.” He added: “We’re going to keep tightening the screws […]  We’re going to continue to designate a broad range of entities involved in development of other key energy projects, future energy projects as well, and associated infrastructure including the Vostok Oil Project, the Ust Luga LNG Terminal, and the Yakutia Gas Project.” So, why is the U.S. so concerned about Russia’s LNG sector?

The first of four key reasons is that LNG has become the most important swing energy source in an increasingly insecure world. Unlike oil or gas that is transported through pipelines, LNG does not require years and vast expenses to build out a complex infrastructure before it is ready to transport anywhere. Once gas has been converted to LNG, it can be shipped and moved anywhere within a matter of days and bought reliably either through short- or long-term contracts or immediately in the spot market. Around a year before the Kremlin ordered the first Russian troops into Ukraine on February 24, 2022, China foresaw the critical significance of global energy dependency, as extensively discussed in my new book on the evolving dynamics of the global oil market. So, beginning in March 2021, a 10-year purchase and sales agreement was signed by the China Petroleum & Chemical Corp (Sinopec) and Qatar Petroleum (QP) for 2 million tonnes per annum (mtpa) of LNG. This was followed by several other major LNG deals prior to Russia invading Ukraine.

In the zero-sum game of emergency global energy supplies, China’s hoarding of LNG prior to the 2022 invasion meant that Europe – critically dependent on Russian gas and oil – would be even more exposed if these supplies suddenly stopped. Russia had been banking on this to produce the same response from Europe to its 2022 invasion of Ukraine as had occurred after its 2008 invasion of Georgia and its 2014 invasion of Ukraine and subsequent annexation of Crimea. That is, Russia expected Europe to do absolutely nothing meaningful to sanction its aggression. The Kremlin was nearly right in its calculations, with the effective leader of the European Union (E.U.) – Germany – only concerned about ensuring its own continuity of gas and oil supplies from Russia in 2022 at all costs, as also analysed in detail in my new book on the new global oil market order. Its acquiescence to Russian hostility yet again was only stopped when the U.S. with U.K. support in Europe and the Middle East worked to establish new emergency supplies of LNG from elsewhere. This determination to never again allow the European Union states to just roll over in the face of Russian aggression due to their over-reliance on Russian energy is the second key reason why the U.S. continues to mercilessly target its LNG sector.

The third reason is that energy exports remain the foundation stone of Russia’s essentially petro-economy and that it was intending to counterbalance the reduction of income from pipelined oil and gas with rises in LNG supplies. Indeed, according to comments from its Deputy Prime Minister Alexander Novak on 22 November last year, Russia intended its LNG market share to rise to 20 percent (at least 100 million tons per year) by 2030, from the current 8 percent (around 33 tons in 2023). As also analysed in my new book on the new global oil market order, Russia earned nearly US$100 billion from oil and gas exports during the first 100 days of the war in Ukraine. Overall, revenues from the higher post-invasion oil and gas prices were much greater than the cost for Russia of continuing to fight the war. However, as prices started to weaken again and sanctions increasingly hit Russia, its finances and ability to secure an outright military victory have been significantly reduced. So desperate has the situation become for President Vladimir Putin that he risked arrest in December to visit Saudi Arabia’s Mohammed bin Salman, and the UAE’s Mohamed bin Zayed al Nahyan, to plead for greater cuts in OPEC oil production in order to push prices up. Again, in the zero-sum game of the global energy market, Russia’s LNG losses from sanctions will be a gain for the U.S. and those LNG suppliers it regards as allies, which now includes Qatar. As it stands now, the Emirate will account for about 40 percent of all new LNG supplies across the globe by 2029, according to comments from its government. The U.S. has seen its LNG exports go from zero before 2016 to around 124 billion cubic metres (bcm) this year, and it is expecting another 124 bcm to come online by 2030. Meanwhile, according to the International Energy Agency, Russia’s share of internationally traded natural gas is forecast to fall from just around 30 percent in the year before it invaded Ukraine to about 15 percent by 2030. Its revenue from natural gas sales is projected to drop from around US$100 billion in 2021 to less than US$40 billion by 2030.

The fourth and final reason why Washington is so determined to effectively destroy Russia’s LNG sector over the long term is that it is an industry so closely associated in Russia with President Vladimir Putin personally. He has long seen LNG – particularly from the country’s huge gas resources in the Arctic – as the key to Russia’s next major phase of energy growth, rather as shale oil and gas was for the U.S., as also detailed in my new book on the new global oil market order. The Russian Arctic sector comprises over 35,700 billion cubic metres of natural gas and over 2,300 million metric tons of oil and condensate, the majority of which are in the Yamal and Gydan peninsulas, lying on the south side of the Kara Sea. According to comments by Putin, the next few years will witness a dramatic expansion in the extraction of these Arctic resources, and a corollary build-out of the Northern Sea Route (NSR) – the coastal route of which crosses the Kara Sea - as the primary transport route to monetise these resources in the global oil and gas markets, especially to its key geopolitical and financial ally, China. Such was Putin’s determination to move ahead with Russia’s Arctic LNG projects that various heavyweight Russian entities were inveigled around the time the U.S. imposed its 2014 sanctions to finance key parts of them. The Russian Direct Investment Fund, for example, established a joint investment fund with the state-run Japan Bank for International Cooperation with each contributing half of a total of about JPY100 billion (then US$890 million) to it. The Russian government itself bankrolled Arctic LNG 1 from the beginning with money from the state budget. It then supported it again when sanctions were introduced by selling bonds in Yamal LNG (the first part of the Arctic LNG programs), and then by providing another RUB150 billion of backstop funding from the National Welfare Fund.

By Simon Watkins for Oilprice.com

Do cruise companies’ green claims hold water?

Carnival's AIDAnova is the world's first cruise ship to run on

 liquified natural gas. AIDA Cruises

SHIPPING NEWS
Do cruise companies’ green claims hold water?
By Maria Gallucci on Feb 5, 2020

Carnival Cruise Line’s latest ship is a behemoth. The Mardi Gras sports 20 decks, 5,200 rooms, and as if that wasn’t enough, a swooping outdoor roller coaster. Unlike most of the company’s fleet, it won’t be running on oil. The vessel, which first hit the water in Finland late last month, will run entirely on liquefied natural gas when it starts sailing from Florida to the Caribbean Sea this fall.

Cruise and cargo shipping companies are increasingly switching to the super-chilled fuel, which produces much less air pollution compared with the dirty “bunker fuel” that previously powered most ships. By 2025, Carnival says it will have 11 vessels running on liquefied natural gas, or LNG, including the AIDANova, the world’s first LNG-powered cruise ship.

But the overall benefits of switching to natural gas aren’t entirely clear. A new study found that using the fuel may do little to curb the shipping industry’s greenhouse gas emissions in coming decades. In certain cases, it might actually be worse for the climate than another conventional marine fuel, researchers said.

The report, by the International Council on Clean Transportation, or ICCT, adds to the debate about whether natural gas should play a role in the industry’s shift to cleaner fuels.

Many environmental groups and academic experts argue that LNG is a costly distraction, one that siphons investment away from technologies that could cut a ship’s emissions to zero, and it locks ships into relying on fossil fuels at a time when climate scientists say we should leave them in the ground. For proponents, the fuel is one of few readily available alternatives to bunker fuel — the longtime industry favorite that is mostly banned from oceangoing ships. Compared to that sludgy old staple, LNG produces much less air pollution and carbon dioxide.

The main problem with LNG is methane, a potent greenhouse gas that traps significantly more heat in the atmosphere than carbon dioxide. The ICCT team found that high amounts of unburned methane can leak from some LNG marine engines. Extracting gas, liquefying it, and transporting the fuel also results in methane leaks and CO2 emissions. Added up over a 20-year period, LNG emits far more lifecycle emissions — between 70 and 82 percent — than “marine gas oil,” a common petroleum product, researchers said.

“That’s the missing part of the equation that [the industry] is not accounting for right now,” said Bryan Comer, a senior researcher in ICCT’s marine program who co-authored the report. “If you account for how much methane is escaping from marine engines, you get a much different picture of what the total climate impacts could be of using LNG as a marine fuel.”

The ICCT study, funded by environmental group Stand.earth, builds on earlier reports that question LNG’s potential benefits. In 2018, researchers at the University College London’s Energy Institute found that “there is no significant CO2-equivalent reduction achieved through the use of LNG as marine fuel,” in large part because of the “upstream” emissions from producing natural gas.

“It’s a dead end,” said Tristan Smith, who researches low-carbon shipping technologies at the institute.

The global shipping industry moves trillions of dollars’ worth of goods every year and accounts for about 3 percent of total annual greenhouse gas emissions. That number is projected to soar in coming decades if vessels don’t use cleaner fuels. Cruise and cargo ships have historically contributed significant amounts of sulfur oxides and nitrogen oxides, which can damage people’s hearts and lungs, especially in waterfront communities.

In response, regulators have started clamping down on maritime pollution. Since the start of the year, the International Maritime Organization, a United Nations body, requires vessels to burn only low-sulfur fuels. Newly built ships must follow energy-efficiency design standards, while the industry as a whole is working to cut emissions in half by 2050 compared with 2008 levels.

Today, most ships burn blends of low-sulfur petroleum products, including marine gas oil and “very-low-sulfur fuel oil,” in their diesel engines. About 4,000 ships, or 4 percent of the global fleet, either have or will have scrubbers on their smokestacks, which allows them to keep burning high-sulfur bunker fuel.

About 750 vessels today can run on LNG, double the amount available in 2012. Last fall, French shipping giant CMA CGM launched the world’s largest container ship to run on LNG, the 1,310-foot-long Jacques Saadé, the first of nine such vessels. Although new LNG ships can cost 10 to 30 percent more to build than similar diesel-powered ones, rising natural gas production is driving down fuel prices, making LNG slightly cheaper than marine gas oil.

Peter Keller, a former executive at TOTE Maritime, said the U.S.-based company decided in 2012 to switch to LNG to get ahead of any potential environmental rules. LNG produces little nitrogen oxide, virtually no sulfur dioxide and nearly zero “black carbon” — soot that absorbs the sun’s heat and directly warms the atmosphere. LNG is also estimated to curb onboard CO2 emissions by about 20 percent.

“We said, ‘OK, what gives us as much comfort as we can get in the future that we won’t get regulated out of using a fuel?’” Keller recalled. TOTE Maritime now operates two LNG-fueled containerships between Florida and Puerto Rico and is converting other vessels in Alaska.

Carnival considers the super-chilled liquid to be “the cleanest fuel with no visible emissions widely available,” the company told Grist. As the company builds new LNG ships, most of its existing fleet still uses bunker fuel with scrubbers at sea and marine gas oil near shore.

Proponents said they still consider LNG to be a way to help curb carbon emissions, despite the new ICCT research. Keller is chairman of SEA-LNG, an industry group that promotes LNG adoption. Last year, his group commissioned a report that said LNG could reduce lifecycle emissions by between 7 to 21 percent compared to heavy bunker fuel, depending on the engine.

That report, produced by the consulting firm Thinkstep, differs from the ICCT study in a key way. Thinkstep analyzed methane over a 100-year time frame, which is common for climate studies. Methane intensively warms the planet soon after it’s emitted then decays into carbon dioxide. (CO2 is less potent but persists in the air for hundreds or thousands of years.) Over 100 years, methane traps 34 more heat in the atmosphere than CO2.

In its first 20 years, however, methane traps 86 times more heat. ICCT researchers emphasized this timeframe, under which LNG delivers no emissions-reduction benefits in any scenario. The team said this metric reflects the “urgent need” to slash emissions within decades to limit global warming.

Comer, the ICCT researcher, said that rather than spending billions of dollars on engines, storage tanks, and refueling infrastructure to switch to LNG, the shipping industry would be better off improving diesel ships and investing heavily in clean-energy technology. New and existing ships could run on marine gas oil and use energy-saving technologies — such as air lubrication for ship hulls and wind-powered rotor sails — to minimize fuel use.

Carnival said it’s working with manufacturers of LNG engines to reduce methane leaks. The company is also piloting fuel cell technologies and large battery storage systems; in the future, its LNG ships might run on liquefied biomethane or liquefied synthetic methane, two renewable fuels in scarce supply.

“We recognise that fossil LNG is not the final solution for decarbonization,” Carnival said by email. But the company considers it “an important stepping stone to our industry’s ongoing objective to reduce its carbon footprint.”

---30---

WAIT, WHAT?!

China Enters into Largest and Longest LNG Import Deal with U.S. 

Venture Global will supply the LNG from two facilities in Louisiana (Venture Global)

PUBLISHED DEC 21, 2021 6:49 PM BY THE MARITIME EXECUTIVE

 

China has entered into the largest, long-term deal for the importation of U.S. LNG which will be supplied from two sites in Louisiana operated by Venture Global. According to the company, this marks the first LNG supply agreement signed by a U.S. exporter with a division of state-owned China National Offshore Oil Corporation (CNOOC), China’s largest importer of LNG.

The deal, which was first rumored in October, was confirmed with a statement from Venture Global and reported on the Department of Energy’s website. Venture Global LNG and CNOOC Gas & Power Group Co. entered into a 20-year Sales and Purchase Agreement. Under the terms of the agreement, Venture Global will supply two million tons per annum of LNG from its Plaquemines LNG export facility, in Plaquemines Parish, Louisiana. In addition, CNOOC Gas & Power will purchase an additional 1.5 million tons (MT) of LNG from Venture Global’s Calcasieu Pass LNG facility for “a shorter duration.:

“Venture Global is pleased to announce the expansion of our footprint in Asia through two new deals to supply the Chinese market with clean, low-cost US LNG,” said Mike Sabel, Chief Executive Officer of Venture Global LNG. “China is critical to global climate efforts, and LNG supplied by Venture Global will serve as an important addition to their low carbon energy mix for decades. This new long-term partnership with CNOOC builds on our company’s continued momentum in a very active 2021.” 

Chinese state media also highlighted the agreement calling it a “move that clearly shows that the phase one trade agreement between China and the US, which covers China's increased purchase of US energy products, are moving forward.” They highlighted that under phase one of the trade deal, China agreed to increase energy imports from the U.S., including LNG, crude oil, refined products and coal, by $52.4 billion over two years above the 2017 baseline. Analysts had accused China to be slow in fulfilling its commitments under the Trump administration trade deal but in announcing this deal used it as an opportunity to call on the U.S. to “create a more favorable environment - both from the political and supply perspectives - for bilateral trade to further expand.” China is citing the LNG deal as it pushes for the U,S, to drop some of the tariffs imposed on its products during the recent trade war. 

“As China’s largest LNG importer, CNOOC is committed deeply not only to the mission of securing China’s gas supply, but also to the climate goals of building a carbon-neutral China by 2060,” said Shi Chenggang, Chairman of CNOOC Gas & Power commenting on today’s press release detailing the agreement. “We are pleased to announce our long-term LNG cooperation with Venture Global. By signing the SPAs with Venture Global, CNOOC will be able to further improve its ability to meet China’s increasing gas demand, whilst providing solid support for China’s energy transition pathway to build a more ‘beautiful China’.”

This deal is one of several that multiple Chinese companies entered into with the U.S. to help build the country’s LNG supply. Last year, Chinese utility Foran Energy Group agreed to buy LNG cargoes from Cheniere Energy between 2021 and 2025. Last month, they entered to further agreement for 20-years starting in January 2023. Cheniere also reported a deal last month with China’s Sinochem Group Co. to supply LNG beginning in July 2022.

BC HELPS GREEN THE LNG INDUSTRY

This is our generation’s opportunity to create an industry for B.C.: LNG Alliance

CEO says much of the work has already been awarded to First Nations

• Jun. 13, 2019  
• COLUMNISTS 
• OPINION
• Bryan Cox is the President and CEO of BC LNG Alliance

In 1867 an entrepreneur named John “Gassy Jack” Deighton opened a saloon near a newly built sawmill on Burrard Inlet. In doing so, he started “Gastown,” the small village that would grow up around the lumber industry to become Vancouver.

This was a few years after gold was discovered on the Fraser River, sparking a gold rush and boom towns throughout B.C., and as coal mining was beginning on Vancouver Island.

The arrival of the first train in Vancouver in 1887 allowed the city to emerge as a global shipping port, cementing our province’s position as a resource developer and exporter.

From the very beginning, primary industries built the growth and prosperity of B.C., and importantly, they continue to provide significant employment and revenues.

Now, our generation has the opportunity to build a new natural resource industry in B.C. from the ground up. By cooling B.C. natural gas until it becomes a liquid, we are able to add value to our resource before exporting it as liquefied natural gas (LNG).

We are the generation that learned to reduce, reuse and recycle, and to be conscious of the state of our environment. We were raised to care about our planet.

LNG is our generation’s opportunity to build a modern industry that provides the world with a resource it needs, with the fewest emissions possible.

We have the knowledge and values to build a sustainable resource that benefits all British Columbians.

For example, First Nations are partners in two natural gas pipelines that would deliver natural gas that will be cooled into LNG in Kitimat. Much of the contract work that has been awarded so far for those pipelines has gone to First Nations businesses or joint-ventures. Through consultation, the Haisla Nation negotiated benefit agreements to allow the LNG Canada project and Kitimat LNG project in their traditional territory. The Squamish Nation developed its own environmental review process – the first of its kind anywhere in Canada – for the Woodfibre LNG project.

Our generation is tackling challenging social problems, like poverty and affordability. The well-paying jobs and careers in the LNG industry have the potential to transform many lives, and the revenue the industry contributes to government will be invested in schools, hospitals, roads, and services across the province.

We are developing the LNG industry to help address some of the world’s greatest challenges. According to the World Health Organization, there are seven million deaths each year attributed to breathing polluted air. With a fraction of the particulate matter of fuels such as coal and biomass, LNG can help the world breathe cleaner air.


ALSO READ: New power line needed for LNG project


ALSO READ: B.C. court to mull continuing order against Coastal Gaslink pipeline


Our LNG facilities are designed to produce the lowest emission LNG anywhere in the world in order to meet strong provincial regulations. This means that B.C. LNG will have at least half and for some facilities – far less than half – of the emissions compared to LNG produced in other countries.


For example, when used to displace coal-fired electricity in China, B.C.’s LNG could reduce global emissions equal to British Columbia’s annual emissions. LNG helps countries electrify by providing firm, reliable backup power for renewables. It is also displacing marine bunker oil in the global shipping industry improving both the marine environment and safety.


Our generation is changing how natural gas is developed. B.C.’s natural gas industry has been recognized for having far fewer emissions than natural gas produced in the U.S, and we are constantly looking for ways to reduce emissions even further.


We have a huge opportunity to build an industry our way, benefitting British Columbians, Canadians and the world. We can share our knowledge with the world to help build a better industry globally. It is clear that if we do not produce LNG in B.C., it will be produced by other jurisdictions, with more lenient regulatory standards and much higher greenhouse gas emissions. British Columbians and Canadians would also miss out on the prosperity these projects could bring. For the sake of our citizens, and the health of the world, we cannot let this happen.


With LNG, our generation can help build sustainable prosperity for B.C.

David Rosenberg: The bullish case for LNG, a reliable energy source investors should tap into

Liquefied natural gas (LNG) should see strong growth in the next decade and more, writes David Rosenberg and his team.

By David Rosenberg and Brendan Livingstone

Financial Post

The Russia-Ukraine war is bringing to the forefront the importance of energy security, which has been neglected in recent years as supply exceeded demand and governments felt increased political pressure to reduce our reliance on fossil fuels.

However, with households confronting much steeper energy bills, which are at risk of rising further as winter approaches, the focus has shifted back towards providing reliable energy solutions at favourable costs. Liquefied natural gas (LNG), which involves cooling natural gas to a liquid state, is an attractive solution because it allows for an efficient way for transportation and storage — to areas not endowed with natural gas reserves — and it is relatively clean in terms of production and combustion.

Over the next decade plus, we see strong growth in LNG — and all that goes with it — and so we believe investors will benefit from seeking out exposure.

LNG is natural gas that has been converted to a liquid by cooling it at -1,620 C (-2,600 F). In its liquid state, natural gas is about 600 times smaller than when it is in a gaseous state, making it substantially easier to store. In addition, the liquefaction process allows for the transportation of natural gas to places where natural gas pipelines are not feasible or do not exist.

Export facilities receive natural gas from producers by pipeline and then liquefy it for transport via LNG ships. Once the tankers reach their destination, LNG is offloaded at import terminals, stored in cryogenic storage tanks and then returned to a gaseous state. After which, natural gas is transported via pipelines to customers.

In recent years, the United States has become a major player in LNG, increasing its export capacity to about 10.78 billion cubic feet per day at the end of 2021 from less than one bcf/d per day in 2015. By the end of 2022, the U.S. is poised to become the largest LNG exporter in the world. About half of U.S. LNG exports go to five countries: South Korea (13 per cent), China (13 per cent), Japan (10 per cent), Brazil (9 per cent) and Spain (6 per cent).

LNG produces 40 per cent less carbon dioxide than coal and 30 per cent less than oil, making it among the cleanest fossil fuels. In addition, it drastically reduces emissions of nitrogen oxide, and it emits almost zero sulphur and particulate matter. As a result, due to its relatively favourable emissions profile — and, critically, its reliability as a fuel source — we see LNG as a great complement to renewable energy as governments work towards a reduction in greenhouse gas emissions.

Some pundits have labeled LNG as a “transition fuel,” but this understates its role in the energy mix of the future since it is a great backup for the natural intermittency of renewables such as wind and solar.

A McKinsey & Co. report — the Global Gas Outlook to 2050 — estimates LNG demand will grow by 3.4 per cent per annum until 2035, requiring approximately 100 million metric tons of additional capacity. While it believes that demand will then slow substantially — to growth of 0.5 per cent between 2035 and 2050 — this will still necessitate more than 200 million metric tons of new supply.

Most of this increase is expected to come from the United States, with smaller contributions from Canada, Russia, East Africa and potentially the Middle East.

Against a backdrop of strong growth over the next decade or so, especially in the U.S., we believe investors should look to have exposure to LNG in a portfolio. Renewable energy undoubtedly has the greatest future growth potential — as governments strive for “net zero” by 2050 (193 parties have signed onto the Paris Agreement) — but the reliability of LNG, combined with the lower associated emissions (relative to other fossil fuels), means governments can concurrently improve energy security while simultaneously reducing pollution.

The importance of having LNG exposure, especially during energy crises, has been on full display this year. Bloomberg Intelligence’s LNG Liquefaction Peer Group — an equally weighted equity index of some of the major LNG producers globally — is up 25 per cent this year as of the end of August, versus the 17 per cent decline for the S&P 500.

Beyond its positive future growth profile, LNG stocks also have the benefit of being attractively priced. The group trades at an EV-to-EBITDA ratio of 4.7x, well below its 10-year average (8.6x), and considerably less than the S&P 500 (13.5x). Other ways to play the LNG theme are through companies involved in the regasification process, transportation (tankers) and infrastructure construction.

David Rosenberg is founder of independent research firm Rosenberg Research & Associates Inc. Brendan Livingstone is a senior markets strategist there. You can sign up for a free, one-month trial on Rosenberg’s website.