Rystad Energy, Enverus See Booms In LNG And CCUS Investment Coming

New studies by a pair of prominent energy analytics and intelligence firms released this week show how current events are impacting energy investments in a big way, outside of the renewables and electric vehicles segments. Both studies project a major portion of the investments to be centered along the Gulf Coast of Texas and Louisiana.

Norway-based Rystad Energy released a report on Wednesday that projects a fairly incredible increase in global investment in new import/export infrastructure related to liquefied natural gas (LNG). The report projects LNG-related investments to surge to $42 billion by 2024, a 50% increase from current year spending and 21 times the $2 billion invested in such facilities during 2020.

In a release, the report’s authors said “new LNG projects are driven mainly by a short-term increase in natural gas demand in Europe and Asia due to Russia’s war in Ukraine and ensuing sanctions and restrictions placed on Russian gas exports.” The projected $42 billion in new investments in 2024 compares to Rystad’s assessements of $27 billion during 2021, $28 billion this year and a projected $32 billion during 2023, resulting in a four-year total investment explosion of $129 billion for the LNG sector.

Equally interesting, Rystad then sees new LNG-related investments falling off a cliff, dropping back to just $2.3 billion by 2029, as governments focus on scaling up investments in renewable energy sources. The firm does see a rebound in 2030, with projected investments of $20 billion.

“Recent price surges in natural gas markets worldwide have somewhat constrained gas demand, triggering a resurgence of coal-fired power generation in many countries. However, governments remain bullish on gas as an affordable, transition fuel for power in the coming years as demonstrated by the rapid growth in LNG infrastructure investments,” Palzor Shenga, vice president of analysis with Rystad, said in the release.

These investments in critical infrastructure have become increasingly urgent in recent months, as European customers have found themselves paying record-high prices for LNG imports as they attempt to wean their countries from Russian supplies. S&P Global Commodities reported Wednesday that LNG cargoes for October delivery into Northwest Europe were priced at $60.183 mmBtu on Aug. 22, more than 6 times the Henry Hub price for U.S. domestic gas.

Not surprisingly, Rystad projects a major percentage of the new investments to take place in the U.S., mainly along the Gulf Coast: “The $10 billion Golden Pass LNG project in Texas, a joint venture between QatarEnergy (70%) and ExxonMobilXOM
(30%), is expected to start production by 2024, adding export capabilities to the Sabine Pass LNG terminal totaling around 18 Mtpa. Venture Global’s Plaquemines LNG in Louisiana – a $13.2 billion development sanctioned earlier this year – is expected to produce about 24 Mtpa and start up in 2025. In a move that may become more common in the crowded market, Cheniere Energy signed a deal with Chinese state giant PetroChina to supply around 1.8 Mtpa of LNG from its Corpus Christi LNG facility, with deliveries from 2026 to 2050.”

Meanwhile, a report issued by U.S.-based energy analytics and intelligence firm Enverus project major new investments coming to the realm of carbon capture, use and sequestration (CCUS) in the wake of the passage of the Biden climate spending bill. The report, compiled by the firm’s Enverus Intelligence Research (EIR) subsidiary, projects a major portion of the new investment to take place in the state of Louisiana, which is rich in the types of underground formations that are fit for CCUS projects.

In a release, the report’s authors stated that “EIR’s records document 10 million tons per annum of operational global sequestration capacity, which represents merely 3% of planned capacity. When evaluating sequestration locations, the report and ranking considered reservoir quality and proximity to point source emissions and transportation as leading indicators. As a result, the Southern Louisiana Oligocene-Miocene, with its clean sand aquifers, stood out among numerous locations and is now deemed among the best storage reservoirs in the world by EIR.”

Evan MacDonald, senior geology associate at Enverus, added “With the recent, substantial uptick in CCUS project announcements across the lower 48, Southern Louisiana stands out as a major hotbed for current and future sequestration activity. To develop an idea of how these projects stack up in terms of storage potential, and to derive insights into future project potential, a firm understanding of the reservoir being injected into is essential.”

The report’s authors go on to indicate that the CCUS-related tax credit and other incentives contained in the Biden climate spending bill are likely to set off what they call a “rush” to kick off such projects in the months and years to come. With ExxonMobil, Shell and other big firms already mounting major CCUS projects centered along the Texas/Louisiana Gulf Coast, this region is set to increase its role as the major center for concentrated U.S. energy investment for years to come.