In order to take advantage of growing energy demands from Europe and East Asia, the USA will be shipping significant amounts of liquified natural gas (LNG) tankers the latter part of this year. The country’s LNG exports are set to hit an all-time high, beating out previous records set back in 2017 and 2018.
History of US LNG Exports
Prior to 2012, US exports of LNG were non-existent. However, due to a change in policy and the shale boom, gas became very cheap in the US as it became the largest producer of natural gas. Initially, much of the excess natural gas that was exported was done by pipeline to neighboring countries such as Mexico. With progressing technologies and a growing need for natural gas around the world, LNG began to grow state-side. The first LNG ship set sail in mid-2012, and by late 2014 annual export volumes had reached 2.3 billion cubic feet per day (Bcf/d). After languishing near 1 Bcf/d in 2015, growth in 2016 pushed exports up to 4.6 Bcf/d, nearly twice as much as in 2014. About half of these exports headed to Japan or South Korea, who together consume about one quarter of all global LNG imports.
During the aftermath of the pandemic, US natural exports have seen a large increase. September 2021 was the first time that the US became a net exporter of natural gas via pipeline. Furthermore, the EIA estimates that this month will be the first time that LNG exports will exceed those of pipeline exports.
Increasing Natural Gas Prices Around the World
Despite efforts to phase out fossil fuels and expand the use of cleaner energy sources, countries are more reliant than ever on natural gas to heat homes and power industry. However, there is insufficient gas to fuel the post-pandemic rebound and replenish depleted stockpiles before the winter months arrive. As exporters like Russia want to retain more natural gas at home, countries are bidding against one another for supplies. When the temps drop, the squeeze will become much severe. For this time of year, inventories at European storage facilities are at historically low levels. Russian and Norwegian pipeline flows have been restricted. This is concerning because calmer weather has reduced wind turbine output, while Europe’s aging nuclear plants are being phased out or are more prone to outages, necessitating the use of gas. It’s no surprise that European gas prices have risen by about 500 percent in the last year and are near all-time highs.
Who’s Buying US LNG
With natural gas prices at an all-time high in most parts of Asia and Europe, nations like Japan, South Korea, and even Italy are looking to increase their supplies of cheaper American natural gas. Several countries have already negotiated contracts for LNG export with U.S.-based companies for over 1 billion cubic feet per day. These include long-term deals with Korean Gas Corporation (KOGAS) which will be receiving nearly 800 million cubic feet per day from Cheniere Energy’s Sabine Pass terminal in Louisiana through 2041. The partnership also includes contracts with several other companies to bring an additional 400 million cubic feet per day into Asian markets (including a recent deal made with Sinopec for 150 million cubic feet per day). The longevity of the contracts being established shows that the demand for LNG is expected to grow over the next decades, due to growing populations, higher living standards, and urbanization in China, India, Indonesia, Malaysia, Vietnam, Thailand & Turkey. This has all lead to Cheniere Energy expanding it’s LNG export facilities in Corpus Christi, which may serve as a foreshadowing to similar expansions that may start to take place in many of our LNG along our coasts.
The recent increase in demand has all lead many of the LNG facilities that are running along the coast of Georgia, Texas, and Louisiana to run at full capacity. A recent announcement came that Cheniere Energy is expanding it’s LNG export facilities in Corpus Christi, which may serve as a foreshadowing to similar expansions that may start to take place in many of our LNG along our coasts in the near future.
RARE PETRO Updates
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