Bloomberg News

U.S. to Supply About 9% of Global LNG Output in 2020, BG Says

February 09, 2012

Feb. 9 (Bloomberg) -- The U.S. will be able to supply about 9 percent of global liquefied natural-gas output by the end of the decade, according to BG Group Plc.

BG, the U.K.’s third-largest gas producer, said the U.S. will have the capacity to export about 45 metric million tons of LNG a year from 2020 as hydraulic fracturing boosts domestic supplies. Global output is seen at about 480 million tons a year by then, based on estimates from Wood Mackenzie.

The company has secured about 34 percent of the planned fuel export potential through deals with Cheniere Energy Inc. and its own Lake Charles terminal in Louisiana, according to Chief Executive Officer Frank Chapman.

Increased U.S. gas production from shale formations has helped drive prices to a 10-year low and led owners of LNG import terminals to explore exports. Cheniere’s proposed liquefaction facility at its Sabine Pass terminal is set to be the first new North American export project since 1969.

The world will need an extra 2.4 trillion cubic meters of new supply a year at the end of the decade to meet growing demand and compensate for depleted fields, at a cost of about $2 trillion, BG said. That’s the equivalent of about 75 percent of last year’s global production, according to BP Plc data.

‘Tight Market’

The divergence between forecast supply and demand will create a “tight LNG market outlook,” Chapman told reporters today after BG reported fourth-quarter earnings.

Increased shale gas supply, its discount to oil, shorter shipping distances to Asia through the Panama Canal, and existing infrastructure will result in a “robust U.S. export margin,” making LNG exports both “practicable and competitive,” Chapman said.

BG could even exceed a target of securing LNG supply of 30 million tons a year in 2020, he said. Japan, China, India and South Korea will be the largest LNG buyers by 2025, according to BG.

BG, based in Reading, England, is examining plans to export LNG to Asia, where prices can reach $17 per million British thermal units, to benefit from arbitrage. U.S. front-month gas prices fell about 39 percent in the last year to about $2.5 per million British thermal units on increased output.

--Editors: Stephen Cunningham, Alex Devine.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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