BAKU, Azerbaijan, Jan.27
By Leman Zeynalova – Trend:
Spending on gas exploration declined in 2020 amid fresh uncertainties related to the global pandemic and its economic repercussions, Trend reports with reference to the International Energy Agency (IEA).
“The drop in gas exploration is a structural trend, which has been fuelled by abundant unconventional resources (especially in the United States), concerns about stranded asset risk and monetisation challenges in a crowded marketplace for pre-FID LNG projects. Exploration capex for prospective gas plays in 2020 hit the lowest level in at least two decades,” the agency said in its Gas Market Report.
Moreover, investment in new liquefaction projects stalled in 2020.
“After a record year for new final investment decisions (FIDs) in 2019, when nearly 100 bcm of new liquefaction capacity was approved, new FIDs in 2020 were limited to a single train development (the 3.4 bcm Energía Costa Azul project in Mexico).This marks the biggest annual drop in liquefaction project approvals in LNG market history. This investment standstill was due to a combination of excess supply and low global gas price benchmarks, widespread capex cuts by the major national and international oil companies, uncertainty about future LNG demand related to the economic impacts of the pandemic, and a lack of buyer appetite for long-term LNG contracts. The collapse of investment activity raises concerns about long-term supply availability,” reads the report.
IEA said the key development milestones, though not a FID, were reached in 2020 for Qatar Petroleum’s 64 bcm LNG expansion project, which could delay concerns of a post-2025 market tightening by several years.
“Nonetheless, LNG capacity outages in 2020 indicate that supply availability cannot be taken for granted even in a seemingly well-supplied market. For a brief period in Q3 2020, for example, as much as 10 percent of global liquefaction capacity went offline due to unplanned outages (while another 3 percent of total capacity was offline for planned maintenance), which contributed to a sudden LNG market tightening in the second-half of 2020.”
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