LNG Headed for $200B Capex Boom

Announcing that the “boom is back” for liquefied natural gas (LNG), Wood Mackenzie says that over the next two years, almost 90 million tonnes per annum (mmtpa) of LNG is expected to take final investment decision (FID) and start construction.

The capital expenditure – for both LNG plant and upstream infrastructure – will total more than US$200 billion between 2019 and 2025.

This is a major boon for engineering, procurement and construction (EPC) contractors and other providers along the supply chain.

However, the LNG industry is notorious for cost overruns and project delays – only 10% of all LNG projects have been constructed under budget – while 60% have experienced delays. The many projects jostling for FID are presenting low project costs to woo potential partners, buyers and financiers.

"But, when we consider the historical reality of LNG construction, and the upcoming LNG construction boom, we think that these capex estimates should be viewed cautiously. At least some project delays are likely," the research report said.

"While there is a risk that current low LNG prices may cause some proposed projects to be cancelled, we think the risk to new LNG supply development is actually to the upside. In our high case we anticipate that an additional 70 mmtpa could be sanctioned in the next three years," it added.

Should even some of this materialise, construction would be stretched beyond the heights of the boom from 2010-2014.