The American LNG boom is back

Soaring global gas prices have sent a signal that more supply is needed. The United States, soon to be the world’s largest LNG exporter, is responding to this demand

“We have provided great material support to the British and will provide much more in the future. There will be no “bottlenecks” in our determination to help Britain. President Franklin D. Roosevelt’s resounding pledge in 1940 to supply military equipment to Britain has been on people’s minds again recently, as other shipments from the United States have helped alleviate another kind of crisis in Europe.

Around 20 shipments of US LNG are currently en route to Europe, responding to soaring UK and EU natural gas prices to surpass $ 65 per million UK thermal units last month. Alex Munton, Wood Mackenzie’s senior analyst for Americas LNG, says U.S. exporters loaded around 100 shipments last month. “US terminals are red hot right now,” he said. “They’re going as hard as they can.”

The arrival of additional US LNG will not end the pressure on European gas prices, which are influenced by a number of factors, including the weather and concerns over supplies from Russia. But it does underline the emergence of the United States as a leading player in the global LNG market, offering a flexible supply that can be diverted to where prices are most attractive.

As gas prices in Europe have exceeded prices in Asia, tankers have been hijacked to profit. The Hellas Diana, for example, was near Hawaii, en route from Texas to China, when it turned back through the Panama Canal and headed for Europe.

In February of last year, when LNG prices were higher in Japan and South Korea than in Europe, most American cargo was headed to Asia. Now it is Europe that attracts the most. Over the past week, US LNG imports to Europe averaged over 250 million cubic meters per day, their highest level on record and equivalent to around 80% of the total LNG export capacity of the United States. United States.

This year, the United States will become the world’s largest exporter of LNG, with the entry into service of new capacities. The industry will also lay the foundation for future growth: additional capacity building is expected to accelerate, Cheniere Energy, Venture Global and perhaps others are expected to make the final investment decisions on new projects after signing deals. sales contracts last year. As Alex Munton says: “The LNG boom is back.

Last month Australia, Qatar and the United States were roughly neck and neck as the world’s three largest LNG exporters, according to data from Wood Mackenzie, but the United States is on the verge to get ahead of the others. The ramp-up of production of train 6 from Sabine Pass to Cheniere, which loaded its first cargo last month, and the imminent start of exports from Venture Global’s Calcasieu Pass project, mean that by the end of the year, the United States will be clearly established in the first place.

I wrote in September about how gas prices in Europe and Asia were sending urgent signals about the need to increase supply, and since then a wave of new LNG sales contracts, led by Chinese buyers, has been signed to support investment in new capacity. The United States has abundant gas supplies, a largely favorable policy and regulatory environment, and an experienced and knowledgeable construction industry, making it one of the most attractive places to develop new capabilities. export.

Some of the factors that have led to skyrocketing global gas prices over the past year are transient, caused by weather conditions and temporary supply disruptions, but many of them will last for years, including the switch from electricity generation to coal in some countries. Europe, China and other markets will become increasingly dependent on imported gas, and relative prices are expected to be favorable for US exporters for a long time to come.

It is remarkable how quickly the United States has become a major supplier of gas to the world. Cheniere made the final investment decision and began construction of Sabine Pass, the first of the new LNG plants in the United States, in July 2012, less than ten years ago. Even in a world where commitments to reduce greenhouse gas emissions as a medium to long-term goal are much more prevalent, the momentum behind the growth of the US LNG industry remains strong.

In short
The ministers of the OPEC + group of the oil-producing countries held their regular monthly videoconference and once again decided to stick to the plan for a steady increase in production that they had agreed last July. Their total production limit will increase by an additional 400,000 barrels per day from next month. However, actual production did not reach the maximum allowed, as some countries, including Nigeria and Libya, were unable to increase production to reach their full quotas. Ann-Louise Hittle, head of Macro Oils at Wood Mackenzie, said the decision to continue the planned production increase showed the group’s demand expectations remained largely unchanged by the rapid spread of the Omicron variant of Covid- 19.

OPEC + ‘s move was hailed by the U.S. administration, which urged members of the group to ramp up production more quickly. Jen Psaki, press secretary to President Joe Biden, said: “We appreciate the close coordination over the past few weeks with our partners – Saudi Arabia, the United Arab Emirates and other OPEC + producers – to help cope with price pressures. ” However, crude prices rose throughout the week, and on Friday morning Brent was above $ 82 a barrel, its highest level since November.

OPEC has appointed a new Secretary General to succeed the much-loved Mohammad Barkindo, whose term ends in July. He will be replaced by Kuwaiti Haitham Al-Ghais, currently Deputy Managing Director for International Marketing of the Kuwait Petroleum Corporation. Barkindo, a Nigerian who took office as Secretary General in 2016, has worked to transform OPEC’s relationship with the wider oil industry, helping to forge the OPEC + alliance with other premier producers. plan, including Russia and Kazakhstan, and opening lines of communication with the US exploration and production sector.

Russian-led troops have arrived in Kazakhstan at the invitation of the country’s president, to help quell protests originally sparked by rising fuel prices. The government has decided to cut subsidies and free up the market for LPG, which is widely used as a road fuel in parts of the country, and the latest round of changes led to a doubling of prices at some gas stations last weekend. . Chevron said production operations continued at its Tengiz field, but made a “temporary adjustment” in production due to logistics issues.

Kosovo has banned cryptocurrency mining after it had to start making blackouts due to soaring energy prices in Europe.

And finally: Hollywood is tackling climate change. Don’t Look Up, new film from Anchorman and The Big Short director Adam McKay, uses a story about the threat of a planet-killing comet to satire the political and media response to impending disaster . The film received a mixed reception from critics and energy experts: some were very positive and others much more skeptical, both about the film’s value as entertainment and its political message.

A common complaint is that the analogy doesn’t really work: Approaching a comet is a very different problem from climate change. As Alex Trembath argued in Foreign Policy magazine, unlike the comet in the movie, the climate does not set a deadline beyond which human life will be impossible. There is also no simple technological solution that would make the problem go away if only we could agree to use it.

Despite all the reviews, the film seems to have been very popular with audiences. On Netflix, it broke records as the streaming service’s most-watched movie in a single week.

Quote of the week
“It is now. The eyes of our children and grandchildren judge us. Ours be the generation that can. And do. As we enter a new year, there is not a moment in lose. – Prince Charles, heir to the UK throne, wrote a column for Newsweek advocating a “military-style campaign to mobilize the strength of the global private sector” to invest billions of dollars in reduction greenhouse gas emissions and the fight against carbon already present in the atmosphere.

Graph of the week
This comes from a recent report by Wood Mackenzie analysts Søren Lassen and Shimeng Yang, which examines revenues from offshore wind projects. They signal a “seismic shift” in the industry, signaled on December 1 by the announcement of the winners of Thor, Denmark’s 1 GW offshore wind tender. “It was a historic event because five of the six bidding consortia submitted an offer where the subsidies were effectively negative – the developers will pay the government and not the other way around,” they write. The graph shows the revenue per megawatt hour for offshore wind projects around the world that have granted support programs, by year of upload. The range is wide, especially in 2022-2023, but the trend of the global average is clear: a decrease of 66% between 2014 and 2025.
Source: Wood Mackenzie