World LNG Market Poised for 'Major Expansion,' S&P Says
The rumors of new LNG terminal construction may be more than rumors. While the liquefied natural gas market has been expanding gradually over the past 30 years, "recent trends point to a major expansion in the LNG trade," according to a Standard and Poor's report released Dec. 27. S&P said that trend is occurring worldwide, but it is most evident in the Atlantic Basin, which appears to be "the next major growth market for LNG." Both in Western Europe and in North America, economic growth, environmental concerns about conventional energy sources and declining domestic gas supplies all point to a long-term, sustainable growth trend for LNG demand, S&P noted.
But while capital costs of building LNG facilities are hefty and have been difficult to finance in the current investment climate, S&P said it has "found that LNG projects, both upstream, transport and downstream, are good candidates for investment project financing as evidenced by a number of its investment-grade ratings, both public and private." The report cited several reasons for that: LNG technology is manageable; host-country gas reserves are generally abundant; LNG end-users bring investment-grade ratings to the table; and the physical assets involved are long-lived and not susceptible to "obsolescence risk." The report also noted that by most accounts, wellhead delivery of gas in North America is falling behind a steadily increasing demand.