LNG in the United States, clean energy in Canada, and downstream projects in Mexico are currently at the center of major infrastructure investments. Will energy capital flows continue on this path by 2025?
ENERGY CAPITAL MAGAZINE
By Energy Capital
LNG in the United States, clean energy in Canada, and downstream projects in Mexico are currently at the center of major infrastructure investments. These trends respond to international markets, energy transition commitments, and efforts to achieve energy self-sufficiency. Will energy capital flows continue on this path by 2025?
Read the Energy Capital Jan-Feb 2021 Issue: Following the Money, here
In the US: the focus is on the LNG market
On one hand, major projects in the United States are currently focusing on developing liquefied natural gas (LNG) infrastructure for export activities. On the other, there are several efforts in clean energy.
Many firms are now working on LNG projects for export activities, each accounting for an investment ranging from $10 to 45-billion. Their production capacity is expected to be up to 7 to 20 million tons per annum (mtpa). Here are some projects in this regard:
Corpus Christi LNG Export Terminal (Train 3) by Cheniere Energy
- Expected in-service date: 2021 (Train 1-2 already on commercial operation)
- Authorized export amount: 5.32 mtpa
- Location: Texas
Golden Pass LNG (Trains 1-3) by Qatar Petroleum, Exxon Mobil, and Conoco Phillips
- Expected in-service date: 2024-2025
- Authorized export amount: 5.20 mtpa
- Location: Texas
Calcasieu Parish LNG Export Facility (Trains 1-10) by Venture Global LNG, Inc
- Expected in-service date: 2023 (Trains 1-5) and 2024 (Trains 6-10)
- Authorized export amount: 6 mtpa
- Location: Louisiana
Is LNG the future?
In 2018-19, a wave of investment in liquefaction projects delivered additional export capacity in North America. Early in 2020, the Energy Information Administration (EIA) still expected global LNG demand to grow at an annual growth rate of 5.8% by 2027.
After a 4% drop in global natural gas demand in 2020, the International Energy Agency (IEA) foresees it to progressively recover in 2021, returning close to its pre-crisis levels in mature markets. However, the 2020 crisis will still have medium-term repercussions by 2025. In this sense, slower growth in gas demand is expected to result in an oversupply of liquefaction capacity additions over the next five years.
Nevertheless, and according to IEA, the Asia Pacific region will still account for over half of incremental global gas consumption in the coming years. According to 2019 forecasts of the Asian Development Bank, this region will increase its LNG consumption at an annual rate of 2.4% until 2030, faster than the expected global average rate of 1.5%.
This demand will be mainly driven by China, India, and emerging Asian markets. Therefore, LNG imports will be highly dependent on these countries’ future recovery policies.
LNG consuming and supplying countries will continue to diversify over the next ten years. For instance, Europe should return to its pre-2019 consumption levels over the next five years. Additional pipeline trade is expected to come from the progressive ramp-up of export infrastructure in Eurasia. In this context, companies in the sector should adopt diversification in services and customers shortly.
U.S. Electricity
When it comes to electricity, the United States is undergoing a shift towards the energy transition. Solar, wind, and biomass infrastructure projects are booming. Here are some examples of notable projects:
Black Rock Wind Farm Project by AEP Energy and Toyota (Wind)
- Expected operational date: late 2020.
- Expected capacity: 110 megawatts (MW)
- Location: West Virginia
Roadrunner PV Solar Park by Enel Green Power North America (Solar)
- Expected operational date: late 2020
- Expected capacity: 110 MW
- Location: Texas
Wild Springs by Geronimo Energy and Electric Power Cooperative (Solar)
- Expected operational date: 2022
- Expected capacity: 128 MW
- Location: South Dakota
North Fork Bioenergy Plant by EQTEC (Biomass)
- Expected operational date: 2021
- Expected capacity: 2MW
- Location: California
According to the EIA, in the span of 2018-2021, the US is adding 72 gigawatts (GW) of new wind and solar photovoltaic (PV) capacity. Globally, the nation ranks third in renewable energy production. Additionally, the organization predicts long-term trends in increasing solar and wind electricity generation for 2050.
In Canada, the transition is key
Energy capital projects in Canada are currently focused on developing sustainable, reliable, and low-carbon infrastructure. In this regard, here are some examples of large companies that are cross-financing renewable projects:
Trans Mountain Expansion Project (TMX-Pipeline) by the Canada Development Investment Corporation
- Expected in-service date: 2022
- Expected capacity: 300-890 thousand barrels per day (MBPD)
- Location: Alberta-British Columbia. Note: Since 2019, the project must reinvest its earnings (500 million dollars a year) in Canada’s clean energy transition.
Pacific Future Energy Refinery by Pacific Future Energy
- Expected in-service date: 2021
- Expected capacity: 200 nearly solid bitumen MBPD
- Location: British Columbia. Note: Its owners’ goal is to build the greenest bitumen refinery in the world
Some companies are also transitioning into the clean power market through upgrades to their electricity transmission and distribution assets. Some noteworthy projects include:
Keeyask Hydropower Generating Station by Manitoba Hydro and 4 Manitoba First Nations
- Expected in-service date: 2021
- Expected capacity: 695 MW
- Location: Manitoba
Old Crow Solar Array Project by ATCO Electric
- Expected in-service date: 2021
- Expected capacity: 900 kilowatts (kW)
- Location: Yukon
Travers Solar Project by Greengate Power
- Expected in-service date: 2021
- Expected capacity: 400 MW
- Location: Alberta
In its energy transition commitment, the Canadian government has said the country will not phase out fossil fuels overnight. However, various demand forecasts show that the use of renewable energy will increase steadily. According to 2019 data, Canada had a higher share of renewables (16.3%) in its energy supply chain than most OECD countries (10.8%). Additionally, the nation ranks seventh in global clean energy production.
In Mexico, look to state-owned project opportunities:
Energy capital trends in Mexico are going to the development of upstream and downstream infrastructure and combined-cycle gas plants. Through various projects in this regard, the current Mexican administration seeks to achieve an energy self-sufficiency goal.
A well-known project is the Dos Bocas Refinery of Petróleos Mexicanos (PEMEX), located in Tabasco. The government expects this $ 8 billion refinery to be in service by 2022, with a capacity of 340 MBPD.
Other PEMEX projects are the exploratory-drilling activities and infrastructure additions to the existing facilities of Ku-Maloob-Zaap and Crudo Ligero Marino in Campeche and Tabasco, with a capacity of 800 and 78 MBPD each.
Regarding electricity, the Federal Electricity Commission (CFE) also has infrastructure modernization projects. For example, the upgrades to the Agua Prieta and Empalme combined-cycle generating stations in Sonora with a capacity of 400 MW ($ 1 billion) and 700 MW ($ 2 billion) each.
Despite the current uncertainty related to the country’s centralization of energy activities, some contractors are already seizing development, execution, and operation opportunities within PEMEX and CFE. Most of these contracts were subscribed within the framework of the 2013 Energy Reform.
A few examples are:
- Diavaz Offshore: PEMEX upstream and midstream facilities’ operation (full and shared) in Tamaulipas, Veracruz, Chiapas, Puebla, Monterrey and San Luis Potosí
- Petrobal Upstream Delta & Fieldwood Energy: PEMEX upstream facilities’ operation for shallow and deepwater activities in Campeche
- ENI Mexico, Qatar Petroleum, Lukoil, Citla Energy: PEMEX facilities drilling and pipeline operations in Tabasco.
Although public entities are tending to centralize energy activities, industrial leaders can provide the knowledge and resources to achieve Mexico’s self-sufficiency goals. The technological lags of PEMEX and CFE would, in fact, require an economical and technical commitment with private companies.
Final remarks
Although energy capital projects follow different paths in North America, a regional perspective is crucial. According to the information shared by Energy Capital, companies in the region can take advantage of infrastructure projects’ capital opportunities.
Whether the focus is on the LNG market, renewable energy, or energy autonomy efforts, the exchange of experiences will provide energy developers, investors, and suppliers with a comprehensive view of business opportunities and innovative solutions to offer.
