Only a fraction of the big natural gas export projects being developed around the world will become reality, as high costs and low profit margins in the gas sector sink those that once had promised huge returns on investment, Royal Dutch Shell (RDS.A, RDS.B) director of projects and technology Matthias Bichsel tells Reuters.
He knows from experience: Estimated development costs for the Gorgon LNG project in Australia (Shell owns 25%) have soared from $37B initially to nearly $55B thanks to high labor expenses and complex technology, Shell quit the Wheatstone LNG project in the country, and it also has abandoned a proposed gas-to-liquids project in Louisiana.
In Asia, where 70% of global LNG trading takes place, spot LNG prices have fallen more than 35% this year to their lowest since late 2012.
Bichsel nevertheless says the long-term outlook for the sector is positive: "We're talking decades ahead, we see a decrease in oil demand and gas will take a more prominent role, including from shale gas. But it'll take time."