While regulatory uncertainty has clouded the outlook for large U.S. export projects, Chart Industries Inc. reported lower global prices and a continued rise in demand is driving an uptick in international LNG and natural gas projects this year.
Management of the Atlanta-based specialty equipment manufacturer told analysts during a recent 1Q2024 call that liquefied natural gas “activity continues, regardless of the U.S. LNG pause.” According to the company, there are at least 30 large projects on the horizon worth $8.76 billion. Of those developing export facilities that Chart is tracking, 15 are outside of the United States.
CEO Jillian Evanko said the firm also saw a growing number of orders from gas-linked sectors during the first three months of the year, including “broader content on international LNG projects” and natural gas infrastructure.
“Strong end market and Chart-specific demand continues, resulting in a record backlog of $4.33 billion,” Evanko told analysts. "Demand is also reflected in our increasing commercial pipeline, our highest ever at over $22 billion, up from approximately $21 billion” in the prior quarter.
International Upsizing
Last month, Chart was selected to provide liquefaction equipment for the 3 million metric ton/year Cedar LNG project planned for British Columbia. Pembina Pipeline Corp. and its partners in April gave Samsung Heavy Industries Co. Ltd. and Black and Veatch a notice to proceed on the floating LNG vessel anchoring the project. First production is targeted for 2028.
Evanko said Chart’s project estimate did not include a large-scale LNG order from an undisclosed international oil company it expects to book early next year. Management also noted that the potential value of the LNG projects it is tracking is growing as developers upsize the scoped capacity of their designs.
In February, QatarEnergy announced it could progress another phase of its series of North Field Expansion projects to increase the country’s LNG production capacity by 85% from current levels. Earlier in the month, ExxonMobil disclosed it could reach a final investment decision by the end of the year on the Rovuma LNG project with Eni SpA in Mozambique.
Some analysts and critics of the U.S. Department of Energy’s permit pause have noted a delay in domestic LNG projects could be adding momentum to large-scale international projects. Equinor ASA has also guided that a potential slow down of new U.S. LNG volumes hitting the market could change the mid-term price dynamics for exporters, adding more profit incentive for projects that could come online before an expected slide in natural gas demand around 2050.
Demand Returns
Today, however, Chart reported that the settling of global natural gas prices could be sparking more investments in LNG and gas infrastructure, especially in Asia. During the first quarter, it received orders for 51 LNG trailers from Chinese customers. It received orders for 25 trailers in 2023 and 15 in 2022.
“I think it's reflective of gas prices having been lower the last couple of years,” Evanko said. However, it is “also reflective of the fact that LNG and natural gas” will be a key part of the global energy mix and infrastructure landscape.
After lingering impacts from the Covid-19 pandemic and price volatility pushed Chinese LNG imports down from record highs for several years, the country returned as the top gas importer last year. Regulators and large state-owned firms have also recently been making moves to liberalize local gas markets and trade China’s imported LNG not used in the domestic market to international customers.
Chart management also flagged an uptick in interest from industrial gas users in Europe. “That one's interesting to me too,” Evanko said. Historically, she said, “Europe has been gaseous mainly, and now we're starting to see some liquid infrastructure coming into play.”
Europe’s natural gas consumption has been curtailed since Russia’s 2022 invasion of Ukraine, mostly led by voluntary demand cuts from industrial users. However, as a glut of LNG cargoes from the United States and other sources hit European terminals and global prices stabilize, Bloomberg estimated Europe’s LNG imports could rise another 10% next summer compared with estimated demand during the forthcoming cooling season.
Chart reported net income of $14.6 million (11 cents/share) in 1Q2024, compared with a loss of $14.3 million (minus 52 cents) during the same period last year.
