Surging global demand for gas has spurred investment in LNG terminals in areas that are not covered by pipelines, fuelling what analysts are now describing as a "construction boom".
"As competition between Europe, the US and Asia for natural gas supplies heats up, gas producers without the ability to export gas via pipelines are taking advantage of the demand and shipping liquid natural gas (LNG) to gas-hungry markets," says a new report by Datamonitor, a London-based market analysis firm.
"Despite its niche position, market players are wagering that LNG will eventually become a major fuel for primary energy consumption (…). With this in mind, there is currently a construction boom in LNG terminals," it adds in the report published on 31 August.
In Europe, the drive for building more LNG terminals was fuelled by the desire to diversify gas supplies following a dispute between Russia and Ukraine that saw Moscow briefly shutting up a major transit pipeline in January 2006. The row highlighted the EU's dependency on Russian gas for more than 25% of its needs with 80% of it transited through Ukraine.
As a response, the EU had taken measures to diversify its supplies, including finalising the Nabucco pipeline bringing gas from the Caspian region and increasing the EU’s LNG capacity fivefold (EurActiv 18/01/06).
For Europe and the US, the major LNG producers are Algeria, Nigeria, and Trinidad and Tobago, according to Datamonitor, with Belgium, France and Spain the major European consumers.
But according to Datamonitor, the LNG construction boom in Europe and the United States is now outpacing demand. "Twenty-two terminals have been approved for construction," said Datamonitor energy analyst David Niles, up from five currently in the Atlantic Basin region. "Already there are two import terminals in the UK, and two more are being constructed in Wales," he added.
"Given the forecasted growth in LNG, even if 10% (3.4bcm) of the terminals that have been approved for construction are actually built, there would still be a glaring under-utilisation of capacity."
"The construction and under-utilisation of so many terminals can potentially increase the risk of volatility in the industry if its growth rates are not maintained or increased," he warned.
