LNG Terminals Market

The global LNG market is experiencing robust growth, driven by rising energy demand due to population growth and rapid industrialization in developing economies. As nations increasingly seek alternatives to coal and oil, LNG is gaining prominence as a cleaner, reliable, and efficient energy source. Its role in supporting the transition toward lower-carbon energy systems is being reinforced by international climate agreements to reduce greenhouse gas emissions and mitigate climate change. In response, many governments are developing policies and regulatory frameworks that position LNG as central to national energy strategies. Significant investments are made in LNG terminal infrastructure, often supported by international partnerships to strengthen global supply chains. Financial incentives, tax exemptions, and regulatory advantages are offered to encourage industries to adopt LNG. Beyond power generation, LNG is also emerging as a cleaner fuel option for transportation and industrial processes, adding further momentum to its adoption. These diverse applications enhance LNG’s economic appeal and position it as a strategic pillar in long-term energy security and sustainability planning.

The development of large LNG terminals requires immense amounts of capital and is, by far, the greatest barrier to growing the market. Liquefaction (export) and regasification (import) terminals consume immense resources. Compared to other countries, the capital costs of an LNG terminal are generally between USD 480 million and USD 2 billion and vary based on the size and complexity of the terminal, location, and the requests for supporting infrastructure. For example, nearly all LNG terminals in India were designed with a capacity of 5 million metric tonnes per annum (MMTPA) of LNG, and their construction costs were somewhere between USD 480 million (INR 4,000 crores) and USD 600 million (INR 5,000 crores). Not only are the capital requirements considerable, but the long development and commissioning periods, often 5 to 7 years, for large-scale projects further complicate the issue. Once operational, the assets usually have long payback periods before they become cashflow positive (7 to 15 years, based on the gas price, utilization rate, and demand in the market). In many instances, the biggest risk is under-utilization of the assets, especially in areas where gas demand is uncertain or lacks stability, infrastructure connectivity is often limited, or policies to support gas are inconsistent.

The LNG terminals market has recently made significant strides, primarily due to global interest in cleaner energy, rising demand for natural gas, and terminals that provide an easier and cost-effective alternative and flexible infrastructure. Improved technology has enhanced the efficiency and sustainability of LNG import and export terminals. One main technological breakthrough in the energy space is the development of floating storage regasification units (FSRUs) and floating liquefied natural gas (FLNG) terminals and vessels. These floating solutions reduce construction time and capital costs compared to an onshore terminal while providing additional mobility and flexibility. An example is how Excelerate Energy's FSRU in Bangladesh has ensured access to LNG. Another significant innovation has been in the prefabrication of terminal components that enable companies to manufacture the components for LNG terminals off-site using modular construction techniques, followed by the in-the-water assembly of the terminal or vessel. This leads to faster project delivery, enhanced quality of product, and less environmental footprint, which collectively impact the terminal operating life and benefit positively. The TotalEnergies Mozambique LNG project is considering using some modular units that will also consider the potential use of scalability and adaptability. Terminal operation monitoring has been enhanced through increased automation and digitalization, leading to significant growth in construction and operational environments.

The floating storage regasification units (FSRUs) are the most commonly utilized types of floating import terminals. While FSRUs cost much less than building onshore LNG terminals, they have considerably higher operating costs. Typically, the costs for leasing an FSRU range from USD 80,000 to USD 120,000 per day or approximately USD 29 million to USD 44 million per year. After Russia invaded Ukraine in 2022, these costs increased considerably. A recent cancellation of an FSRU project in Bangladesh had a reported daily cost of USD 300,000 (BDT 33.8 million), translating to approximately USD 110 million (BDT 13.2 billion) annually. Wärtsilä, a maritime technology company, states that after six or seven years of operations, onshore LNG terminals will have a lower cost than FSRUs.