New projects to boost LNG output by 14%

Liquefied natural gas output may rise 14 per cent next year as ventures in countries like Qatar and Indonesia, accounting for more than a quarter of the world's supplies, begin production, a London-based consultant said. Output of LNG, or gas chilled to liquid form for transport by tankers, may climb about 25 million metric tons to about 208 million tons next year, Andy Flower, an industry consultant and a former executive at BP LNG business, said in an interview in Singapore. The increase may suffice to meet annual demand from South Korea, the world's second-biggest LNG buyer.

Global LNG trade rose 7.3 per cent to 165.3 million tons last year, according to the BP Statistical Review of World Energy June 2008. Demand for the cleaner-burning fuel will increase 10 per cent a year through 2015, more than five times as fast as crude oil, Citigroup analysts led by James Neale said in an April report. "Consumption of LNG this year may reach about 183 million tons from 173 million last year," Mr Flower said. "New projects are starting up in Qatar, Indonesia, Yemen, Australia and Russia." Mr Flower's output estimates for last year are higher than BP's. Projects from Australia to Nigeria may have produced about 88 million tons in the first six months of this year, he said.

Output, however was lower than expected because of diversion of gas for domestic use in some countries and inadequate pipeline infrastructure and equipment failures in others. Egypt produced about 5.2 million tons in the first six months of this year, compared with a potential 6.1 million tons, to meet energy demand at home, Mr Flower said. Nigeria supplied about eight million tons, or about 72 per cent of its first-half capacity, he said.

LNG supplies this winter may be "very tight," Mr Flower added, which could boost prices. Prices may rise to as much as US$25 per million Btu in the Northern Hemisphere winter, said John Harris, a director at Cambridge Energy Research Associates. "Asian prices are influenced by UK gas future prices," Mr Flower said, because Japan and South Korea compete for LNG with Europe. Prices of gas in Continental Europe are linked to oil prices and they trail behind crude oil by three to six months, he added, declining to give a forecast on LNG prices.

Meanwhile, Oman plans to build coal-fired power plants to beat a shortage of gas to fuel future projects for economic diversification, an oil and gas ministry official said yesterday. The Gulf is the world's biggest oil exporting region, but has been slow to develop massive gas reserves. Rapid economic growth has absorbed fuel supplies and left all the countries in the region except Qatar short of gas.

"It makes a lot of sense to build coal-fired power plants as an alternative to gas since we don't have enough gas to fuel all of our future projects," Zaid al Siyabi, the director general of exploration at Oman's oil and gas ministry, said. "This is the future. Coal is cheaper to import and at the same time we can use our gas for other purposes like the export of LNG," he added. Faced with spiralling power demand, regional governments are considering alternatives to gas to generate electricity, such as nuclear and coal plants. The UAE became the first country to move ahead with plans for a coal plant last month.

Oman exports nearly 10 million tons of LNG per year from four trains, but has struggled to meet its contract commitments as domestic demand rises. Oman wants foreign investors to build its first 1,000 megawatt coal-fired plants at Duqm, where the sultanate is developing an industrial zone. * With Agencies