Nitrogen+Syngas 390 Jul-Aug 2024
31 July 2024
Gas is still the key
“The good news is that the LNG market remains in robust health…”
With all of the focus on low carbon ammonia and methanol developments, one could occasionally be forgiven for forgetting that most of the syngas industry relies upon natural gas as a feedstock, and that gas pricing and availability remain the key determinants of profitability for producers. As our article this issue discusses, even low carbon ammonia is likely to be largely based on natural gas, albeit with carbon capture and storage, at least for the remainder of this decade.
The gas industry has continued to grow inexorably over the past few decades, from a series of regional markets to an increasingly global market, thanks to the massive rise of gas shipping as liquefied natural gas (LNG). This week saw the publication of the International Gas Union’s 2024 report on the state of the LNG industry, and it makes for interesting reading.
The United States became the largest exporter of LNG last year, at 84.5 million t/a, up 10% on 2022, outpacing Australia, which in turn had outpaced Qatar as the leading exporter a few years ago. These three countries now account for 60% of all LNG exports between them, and adding Russia and Malaysia takes that figure to three quarters of the LNG market. On the demand side, the destination remains mainly Asia; China, Japan, Korea and India collectively take just over half of all shipments, but Europe now receives 30% of LNG cargoes, as it tries to pivot away from the pipelines from Russia that it had previously relied upon. Indeed, the US – Europe route is now the single busiest for LNG tankers.
Pricing meanwhile seems to have comprehensively decoupled from oil indexation, and fell below $8.00/MMBtu for the Japan/Korea benchmark in February this year, after a much more subdued winter price rise for 2023-24 than the price spikes seen the previous year. The price of LNG remains of vital interest to the ammonia industry as European and
Indian gas pricing is dominated by LNG markets, and these two regions represent the floor price for ammonia at present.
The good news is that the LNG market remains in robust health. As of February this year, the IGU reports that 216 million t/a of new capacity is under construction or has achieved financial closure, of which around half is in North America. The continuing cheapness of US gas makes it an ideal source of LNG. In theory that should also make it an ideal producer and exporter of ammonia, but capital costs, permitting issues and the need for carbon capture or other lower carbon technologies have slowed the pace of development there.
Floating LNG production rigs also continue to be popular. While only 12.7 million t/a of FLNG plants are currently operational, another 100 million t/a is under construction or development, over 90% of it in the US, adding operational flexibility to LNG production. Europe is also looking to floating regasification terminals as a way of rapidly boosting LNG import capacity.
All of this activity – in theory! – makes for a more stable and lower gas cost market, after the rollercoaster ride of the past few years. However, the report acknowledges that the main risks to its forecast remain political.
