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LNG project developers must learn to think small, expert says

LNG export projects need to be smarter instead of bigger,according to an energy infrastructure expert at the 2016 EIA Energy Conference.

The current market for LNG exports has challenges that haveshifted the look of the sector, such as an oversupply of natural gas andincreased competition. These challenges will require LNG export proposals todecrease in size and become more innovative, said Ernie Megginson, president ofthe energy projects consulting firm Megginson & Associates Inc.

"Projects need to be smarter," Megginson said onJuly 11. "They don't need to be phased and they don't need to be bigger."

The glut of natural gas in the world will make it difficultfor big projects that boast larger liquefaction trains to find the large,long-term customers that supported earlier U.S. LNG export projects. The largeamount of gas has shifted the market to the advantage of buyers. Analysts haveestimated the LNG sector will be oversupplied until the .

These conditions will force the developers of any newprojects to be flexible. A decrease in the size of LNG trains would giveproject developers increased flexibility, including lower costs and shorterdevelopment cycles. Smaller train sizes would allow projects to cater to agreater number of customers, including those who might have problems with thelogistics of larger trains.

With the advantages come other problems, however. A moreflexible business model could be troublesome as developers try to findfinancing, Megginson told his audience.

"These projects have to go through the rigor of bankreviews and finance committees, and finance committees do not like flexibility,"he said. "They want certainty."

Yet even with the U.S. being a highly competitive area forLNG projects, with about 60 projects listed by the U.S. Department of Energyand 10 of those projects approved by FERC, there is still some arbitragepotential for future projects.

"There is some hope there," Megginson said. "Youhave a lot of projects vying for this market … Not all of them are going to besuccessful."