This analysis is by BI Industry Analyst Talon Custer and BI Senior Industry Analyst Scott J Levine.
Oversupply and pandemic-induced demand weakness afflicts the LNG industry, but resulting delays in final investment decisions and project construction should tighten the market down the road. We expect few project FIDs this year, if any, and 2021 could be challenged as well. LNG demand should surpass supply in 2024, in our view.
LNG demand should surpass supply in 2024, in our view, driven by final investment decision (FID) delays for numerous projects. Proposed terminals with about 230 million tons a year (mtpa) in global export capacity sought FID in 2020, many of which had target start dates in 2024. Some of those weren't going to be built anyway, but the impact of Covid-19 and FID postponements mean even fewer come to fruition. Moreover, projects that eventually make it through likely won't be operational until at least 2025.
We assumed an average annual growth rate of 4% for demand. There is 108 mtpa under construction, but the pace of projects coming online will slow in 2021-23. Shell's LNG Canada and Total's Mozambique LNG are slated for 2025, but we expect both could be delayed to the late 2020s, if completed, further tightening the market.
With delays in FIDs due to weak market conditions and the pandemic, proposed U.S. LNG projects with total annual capacity close to 130 million tons will likely compete to achieve FID next year, based on our calculations. The market should stay challenged in 2021, but some potential buyers that have been reluctant to commit to long-term offtake agreements may be more willing in 2021 amid the expectation of a possible supply crunch in the mid-2020s.
Many approved projects aren't viable, in our view, and few may reach FID through 2021. Those with more capacity already contracted have a better chance, such as Sempra's Port Arthur. Lack of liquidity drove LNG Ltd. to sell Magnolia assets for just $2 million.
If any liquefaction projects were sanctioned globally this year, we would expect them to be small terminals, with Sempra's Energia Costa Azul in Mexico having the best chance. Exxon delayed FID at the Rovuma project in Mozambique, and it may not be a sure thing next year as difficult market conditions persist and capital spending should still be limited, in our view. Qatar Petroleum is seeking FID for about 49 million tons a year in proposed capacity, and for operations to start 2025-27. We think it could move forward with some capacity over the next 24 months, but not all.
Qatar is already a top LNG exporter and diversity of supply for offtakers is key. There are international projects with about 104 million tons of annual capacity that sought FID this year, according to Poten, most of which have been delayed.