Worldwide: New Entrants Onto The World's LNG Stage


Long before the International Energy Agency declared the world to be poised to enter the golden age of [natural] gas,1 energy analysts were busily reviewing data and peering at maps of the planet. The world was indeed undergoing a dramatic paradigm shift with announcements of significant conventional and unconventional gas discoveries becoming a regular event. However, these discoveries have only served to underscore the fundamental commercial challenge of how best to monetize these resources in a timely fashion and on reasonable commercial terms.

Ever since the early design work of Godfrey Cabot and his 1915 patent for a river barge capable of transporting liquefied natural gas (LNG)2 the ability to transport natural gas in liquid form has helped to unlock distant natural gas reserves previously considered stranded. Today, announcements about newly proposed LNG projects appear almost weekly in industry journals and newspapers as states and private industry scramble to realize the opportunities presented by newly unlocked gas reserves. There is no doubt that LNG will continue to play a pivotal role in the quest for monetizing these resources. But with so many projects to choose from industry watchers are understandably puzzled: which of these projects will succeed and which ones are likely to fade into oblivion?

This note examines recently proposed LNG export opportunities in East Africa, Western Canada, the U.S. Gulf of Mexico region and the most recent Australian ("Third Wave") projects and considers the advantages, and disadvantages, of each.

East Africa

As one starts to look around the globe a natural starting point is East Africa. Last year four of the world's five largest oil and gas discoveries were made off the coast of Mozambique with Eni and Anadarko now having identified 85 Tcf of recoverable gas reserves.3 When recent finds off the coast of Tanzania are factored in the East African reserve numbers quickly grow to more than 150 Tcf.4 The advantages of the East African LNG opportunity are significant. The gas fields are generally situated in shallower waters which are located close to shore, and the lands necessary for the development of a greenfield LNG facility are readily available. The presence of highly experienced players including Korea Gas, Anadarko and Eni also increase the likelihood of project success.

However this optimism is guarded as the challenges to the success of the East African LNG projects include the absence of a well developed oil and gas law, a lack of regulatory experience within government, an absence of energy infrastructure, and a scare trained labour force. In short, although gas resources are plentiful, accessible and affordable, the required expertise and infrastructure is lacking.

Western Canada

A very different demand presents in Western Canada. As U.S. demand for Canadian gas continues to decrease rapidly the focus for new market opportunities has shifted to Asia. Canada's reputation for technological oil and gas innovation, transparent regulatory regimes and plentiful gas reserves, make Canada an ideal new entrant onto the global LNG stage. Recent reports by the Ministry of Energy for the Province of British Columbia place BC's unconventional gas reserves at greater than 1,600 Tcf5. The province has recently announced that it is committed to the prompt and efficient monetization of these gas reserves though an aggressive LNG mandate, and has reported a plan to have three export projects operational by 2012.

Still, concerns circle around Canada's LNG initiative. Late last year the Fraser Institute released a report expressing reservations as to whether this goal was realistic.6 Reservations were expressed regarding unnecessary duplication between the federal and Provincial regulatory process, a lack of LNG regulatory experience within government, investment uncertainty in light of political musing over the introduction of new taxation policies7 and significant resistance from First Nations and other stakeholders regarding the necessary - and very expensive - pipeline expansion projects. In Western Canada, although the government has [publicly] expressed support for the proposed projects, uncertainties identified by commentators include the fact that the resources are a considerable distance from the coast, requiring a politically sensitive and expensive pipeline solution.

U.S. Gulf of Mexico

Today shale gas contributes slightly less than one-third of America's natural gas supplies but experts predict that by 2020 shale gas will account for more than one half of America's natural gas needs. With extensive pipeline infrastructure already in place, good access to capital, a robust domestic energy industry and more than a centaury of oil and gas regulatory experience, the US is well positioned to become a major player in the global LNG export market.

Still, the US does present a number of significant questions. First, under US law export approval from theDepartment of Energy ("DOE") is required in order to export gas to nations that do not have a Free Trade Agreement in place with the United States. Presently the Republic of Korea is the only Asian gas consumer with a free trade agreement with the US. Without such an agreement the DOE is required to conduct an assessment in order to determine whether the export of LNG is in the public interest.

This assessment process allows interested parties to express their views and participate in the proceedings. Earlier this year the Sierra Club, the American Public Gas Association and DOW Chemicals each filed materials urging against the export of LNG. Environmentalists expressed the concern that LNG exports would serve to increase drilling activities and that without a ready market for LNG exports, drilling activity will be dramatically reduced. US manufacturers also express concerns regarding export approvals; but for very different reasons. They argue that abundant domestic natural gas provides manufacturers with a competitive commercial advantage which needs to be protected. They seek to increase exports of manufactured products from the US rather than the export of gas as LNG.

The puzzle is not an easy one to solve. A December 2012 report of the DOE suggested that there may be very little US LNG exported after all. Although the existing sites in the US (known as brown-field sites) provide the US with an advantage regarding project capital expenditures (cap.ex.) pricing still remains a concern. Exports from the US Gulf will not be able to access Asian markets without a voyage through the Panama Canal, and while steps are now underway to permit the transport of LNG through the canal, questions regarding canal charges, and passage logistics, have yet to be resolved by canal authorities. Moreover a recent report out of Rice University ran a number of market scenarios using the Rice World Trade Pricing Model and concluded that there were very few scenarios where US Gulf LNG exports would be internationally competitive. When seeking to better understand the risks associated with the proposed US projects, while all of the required elements for a series of successful export projects are present, the question receiving the most scrutiny from industry relates to the political approval process.


While Qatar maintains its reign as the world's undisputed LNG export champion, Australia continues to aggressively seek the crown. Last summer the EIA projected that if the construction of existing LNG projects continued as scheduled, Australia will overtake Qatar as the world's leading LNG supplier by as early as 2020. Here the key question continues to be the "if" as project delays, cost overruns and postponed FIDs (final investment decisions) continue to plague many of the Australian projects.

When examining the Australian LNG projects, the same set of issues regularly surfaces. First, project overruns -- particularly those associated with the "Third Wave" projects - have become legendary. In December of 2012 it was reported that the Gorgon LNG project (a 15 MMTPA facility) could cost as much as Aus$ 60 billion.9 A study commissioned by Santos earlier last year found that, on average, an LNG project being constructed in Australia was more than three times as expensive as similar project situated on the US Gulf Coast. The rapid strengthening of the Australian dollar, a shortage of skilled labour in Australia, and a shortage of skilled suppliers have all contributed to this cost escalation.

Second, a significant amount of gas for the new Australian projects is to be provided by coal seam gas ("CSG") reserves. Production requires water resources which are becoming increasingly scarce and recently enacted legislation in both New South Wales and Queensland evidences the difficultly in balancing existing agricultural and ranching needs with the water requirements of the growing CSG industry. Research by Berstein from spring 2013 indicates that the three major CSG LNG projects are more than 30% over budget.10 Finally, data from late 2012 suggests that the recovery rates for the CSG wells drilled to date are lower than expected, and that an additional 12,000 wells may be required in order to support the required production levels.


Each of East Africa, Western Canada, the US Gulf of Mexico and the Australian "Third Wave" projects present their own advantages in the quest to capture new LNG market share. Similarly, each presents its own unique project challenges. Still industry watchers continue to express enthusiasm regarding the Australian projects, cautious optimism regarding the Western Canadian projects and a "wait-and-see" approach for both the US Gulf and the East African projects. In the end however, only time will tell where success will be found, leaving the world's LNG industry watchers with a great deal to think about in the interim.

  1. "Golden Rules for a Golden Age of Gas: World Energy Outlook Special Report on Unconventional Gas"; International Energy Agency, November 2012.
  2. LNG: A Nontechnical Guide, Tusiani, D. and Shearer, G.; (Pennwell: 2007, page 138).
  3. Banks, J.P, Brookings; "Could East African Gas Impact U.S. Liquefied Natural Gas Exports?"; February 15, 2013; citing Wood Mackenzie at page 2.
  4. Wood Mackenzie; "East Africa Faces a Technical and Commercial Challenge to Bring its 100 tcf of Discovered Gas to Market"; 22 August 2012 and Reuters; "Analysis - East Africa Risks Missing the LNG Boom", (September 19, 2012).
  5. BC Ministry of Energy, Mines and Petroleum Resources (2012) as reported in Fraser Institute "Laying the Groundwork for BC LNG Exports to Asia"; (October, 2012, page 5).
  6. Fraser Institute, (Oct. 2012); Laying the Groundwork for BC LNG Exports to Asia.
  7. Globe and Mail; (February 27, 2013).
  8. Medlock Report; (August 2012); Political and Economic Influences on the Future of World Market for Natural Gas.
  9. Reuters; (December 5, 2012); Chevron Adds $15 bln. to Gorgon LNG project Cost Estimate.
  10. Bloomberg, (February 7, 2013); "Australia LNG Growth to Continue on Asia Demand, Bernstein Says".

Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global legal practice. We provide the world's pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members ('the Norton Rose Fulbright members') of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions