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www.marinelink.com 13 from proposed projects to liquefy North American shale gas. North America’s Export Potential As a result of surging shale gas pro- duction, the US is expected to overtake Russia as the world’s largest gas pro- ducer by 2015, reach self-suffi ciency by 2020 and transit from a natural gas importer to a net LNG exporter. US gas self-suffi ciency has prompted Canada’s search for alternative gas markets and has explored gas exports to Asia. These developments could mean a shift in reliance on traditional oil producing countries in the Middle East and would threaten Australia’s LNG export poten- tial. With North America’s potential as a net LNG exporter, there has been skep- ticism regarding assumed lower prices. Firstly, the present price of US shale gas is due to over-production. In addition, liquefaction and ship- ping costs could substantially close up the arbitrage and create a conver- gence in prices from differing regions. Over time, could exporting from North America be uncompetitive compared to Australia through a weakening Austra- lian dollar and increase in labor supply prompted by the slowdown in the local mining boom? Mediterranean Progress The eastern Mediterranean is the lo- cation of exploration activity off Cy- prus, Turkey and Israel and a number of major gas discoveries. It has also been inching towards FLNG with Pangea LNG leading the development of the Tamar FLNG project, located off Isra- el’s coast. A second development is also planned for the neighbouring Leviathan fi eld, which is the world’s largest off- shore gas discovery in the last decade. However, while the region’s develop- ment has a compelling future, it is beset by local political instability and indeed civil war in Syria. FLNG Capex According to the Douglas-West- wood’s ‘World FLNG Market Fore- cast’ the market for the construction of FLNG vessels is expected to increase from $3.7B in the period 2007-2013 to $64.4B during 2014-2020. All eyes are on the developments in Australasia and Asia with Shell’s Prelude FLNG and Petronas’ PFLNG 1 as the pioneer FLNG developments. Asia, which is a focus area for both fl oating liquefaction and regasifi cation vessels, is expected to account for 29% of expenditure, con- tributing $18.2bn. Australasia accounts for the largest proportion of global Ca- pex at 30%, driven by liquefaction proj- ects with spend of $19bn in the period 2014-2020. Given a competitive market, we could assume that LNG will be bought from a supplier closest to the point of consump- tion. Indeed, factors such as geographi- cal proximity, slowing oil production rates, technological advancement, abundant supply and unprecedented demand growth in Asia point towards a locus of FLNG development in Austra- lian waters. It could, however, be argued that at- tention should be shifted to develop- ments in unconventional gas. However, it will be diffi cult for others to replicate shale gas success in the US within a de- cade given supply chain constraints and uncertainty over long-term production levels. While not without political is- sues and other impediments, the FLNG solution will, over the long term, extend beyond the pioneer projects and beyond Australian waters. The Author Amanda Tay BSc is a member of DW’s Analyst team, where her principal activi- ties include quantitative analytics and macro-economic analysis, competitive analysis and supply chain mapping. She has a strong background in the Asian fi - nance sector having spent several years with UBS AG as part of the investment banking legal and compliance team. The World FLNG Market Forecast 2014- 2020 includes comprehensive examina- tion, analysis and a 14 year view of FLNG expenditure. http://www.douglas-westwood.com/ shop/shop-infopage.php?longref=1253 The World LNG Market Forecast 2013- 2017 details LNG trends by region and facility type, supported by analysis and insight for strategy teams within ship- ping companies, contractors, shipbuild- ers, oil & gas operators, gas utilities and fi nancial institutions. http://www.douglas-westwood.com/ shop/shop-infopage.php?longref=1175 MR #2 (10-17).indd 13 2/5/2014 10:06:11 AM
