No new liquefied natural gas (LNG) export projects could be approved in North America in 2020 as the coronavirus pandemic put energy demand and prices under intense pressure, bankers and industry analysts said. This marks the first halt in the region’s LNG development after an uninterrupted expansion in the last two decades. This also contrasts a record level of approvals for LNG projects in 2019.
The analysts said that Sempra Energy’s Costa Azul export plant in Mexico is the only project that has a chance of receiving an FID in 2020. Meanwhile, other North American LNG projects are facing a gloomier outlook. In the middle of last year, about twelve North American LNG developers expected to make FIDs for their projects by the end of that year, but none of them has started construction.
At early 2020, a similar number of producers said they intended to make FIDs by end-year. However, the number has fallen to four by this summer. These four projects are Delfin Midstream’s Delfin Gulf of Mexico project, Sempra Energy’s Costa Azul, Annova’s Brownsville, and Venture Global’s Plaquemines Parish. Delfin Midstream has confirmed that it is now planned for an FID in 2021. Other developers have yet to ensure whether they still planned for FIDs this year.
Analysts said that record new capacity added last year in the US might provide no room for new projects until the middle of the 2020s. More than 21 million tons/year of new capacity came onstream last year and more than 16 million tons/year has entered service this year. The expansion is expected to slow down next year, helping the market balance, analysts noted.
Analysts said smaller developers would find it challenging to navigate the current market environment. However, companies with large LNG portfolios, including oil majors, may find the investment delays positive. Bernstein analysts expect the delays to last for 12 to 18 months, which could boost prices and oil majors’ profits by 2025. Analysts projected these companies to be the first to return with projects’ FIDs.
