U.S. LNG Projects Hit by Energy Price Slide

Energy Aspects sees 1 U.S. project getting go-ahead in 2015; BG Group (BRGXF) delayed final decision on Lake Charles until 2016.

Sinking oil and gas prices have put the brakes on the development of the U.S. liquefied natural gas (LNG) industry, with planned projects being delayed or even scrapped altogether.

U.S. natural gas production has soared to record levels in recent years due to advanced drilling techniques, including hydraulic fracturing, or fracking, triggering a new LNG export market.

A halving of energy prices has dramatically changed the economics of export projects and cut investment plans, however, with only one of dozens of planned projects expected to win a final investment decision this year.

"Global gas prices have fallen so far that the economics for everyone looks difficult," Trevor Sikorski, analyst at UK-based consultancy Energy Aspects said.

"You're just looking for those projects that have a lot of long-term supply agreements in place already and the only one you would say that has that is Corpus Christi."

Sikorski estimated Cheniere Energy (LNG)'s Corpus Christi project had already sold around 90 percent of its expected gas output for the first two trains via long-term sales agreements.

Before the gas price fall, Energy Aspects had expected three or four projects to reach final investment decisions in 2015.

Excelerate Energy's Texan liquefied natural gas terminal plan has already been put on hold, while the final investment decision on BG Group's Lake Charles project has been delayed until 2016 from 2015.

"The serious players are going to have less cash to be able to consider additional incremental investments and they're going to have to deal with potential write-offs to previous investments given the oil price," Kathleen Eisbrenner, chief executive of Next Decade LLC said.

"Lake Charles is an example of an oil major pulling back," Eisbrenner added.

Next Decade is working towards final investment decisions on two U.S. projects in Texas but has no target start dates yet.

A recovery in energy prices could help get projects back on track but few are forecasting this in the near future.

Still, projects under construction including Sabine Pass, Freeport LNG, Cove Point and Cameron LNG mean the United States will become one of the world's top suppliers of LNG in the next five years, even with other projects being delayed or cut.

"There are so many being planned, there is no way that all these projects can go ahead at the same time," Terje Halmo, an LNG industry consultant said. (Reporting by Sarah McFarlane