The United States has been an energy-hungry nation since it was founded, but it has regularly exported energy as well. The nation’s forests, coal, oil, and gas fields have shaped the world around it as technological innovation has supplied ever-expanding ways to exploit the abundance of resources the nation finds itself blessed with.
It is a good time to be an American energy company, and good to be in
business with them, with no sign that trend is going to abate in the coming
years. The US is rapidly developing additional capacity for LNG exports, with a
focus on the energy-hungry markets in Europe and Asia. Widespread adoption of
shale gas fracking has secured the country’s natural gas supply for years to
come, with 40% of US gas coming from shale.
Both Asian and European gas consumers have had a particularly rough
quarter with regard to energy prices. The winter months are going to be even
crueler to their wallets and energy stores, as a poor wind and solar harvest in
the summer has left these regions without their metaphorical granaries of gas.
US gas, while it is priced higher now than it has been since 2010, is still in
great demand.
The Short
The US has announced plans to massively increase its gas liquefaction
capacity by the end of the decade, moving from a distant-but-competitive third
place at 44.8Mtpa in 2020 to nearly triple that by 2030. The FERC-approved
capacity of LNG projects stands at over 200Mtpa. However, the impacts of
Covid-19 have lingered in the minds of investors, and no new projects have
managed to secure FID in 2021.
Delays continue in the confirmation of new projects from 2020, with the
27Mtpa Driftwood LNG, the 20Mtpa Plaquemines LNG and the 11Mtpa Port Arthur LNG
terminals all awaiting final investment decisions (FIDs) in late 2021 or early
2022, after being pushed back from earlier in 2021. Several expansions are also
due for FID in 2022, including the 10Mtpa Corpus Christi Stage 3 expansion and
the Sabine Pass 5Mtpa Train 6 expansion.
Under construction and nearing completion are Calcasieu Pass, with first
LNG due in 2022, and Golden Pass, due in 2024. Permits for the commissioning of
Calcasieu Pass have been requested, and the site is expected to begin
commercial operations early in 2022. Owner Venture Global has recently signed
two major offtake agreements to sell LNG for its other upcoming site,
Plaquemines LNG.
Pricing for US gas will come down towards the end of the winter season
as demand eases in late February. Short inventory stocks due to the cold 2020
winter, scorching summer and poor renewable energy harvest have left most of
Europe and Asia scrambling for power amid skyrocketing prices – the US Henry
Hub price remains comfortably above US$5.00.
Furious ongoing European negotiations with
Russia around Nord Stream 2 and gas supply will likely result in supply for
Europe being secured at a premium from Russia after the massive nation has
secured its own stores. This will help maintain high demand for US gas into the
latter part of the calendar year and keep prices high.

The Middle
Over the next decade, LNG supply from the US is expected to grow from
35Mt in 2020 to 110Mt in 2025 and further to 124Mt by 2030. This rapid growth
will account for a large share of the expansion of the LNG market as the
world’s energy industry continues to transition away from more carbon-intensive
fossil fuels. The US’s primary competitors are Qatar and the Middle East for
LNG production specifically and Russia for the production of natural gas more
broadly.
In the medium term, exports of natural gas from the US will be destined primarily
for the European and East Asian markets as the energy transition picks up
speed. The shift from fossil fuels to green and blue hydrogen will keep demand
for natural gas steady until newer technologies are both proven and economic.
The Long
The US will continue to steadily increase its supply of LNG out to 2040.
Natural gas is a natural choice for a nation with an abundant gas supply, and
well-supplied neighbours create a continuing incentive to export that gas via
LNG shipping. The US is expected to produce over 230Mt of LNG in 2040, with
production growing steadily from 110Mt in 2025.
The sheer size of the industry’s planned growth will create an LNG
surplus unless supporting demand can be found amongst the world’s developing
nations. In future, the primary target markets for US market are expected to be
developing nations, which will be seeking transitional fuels once they move
past the use of heavy fossil fuels.
Once the developing market emerges, the US exports of LNG will shift
away from the greening Europe and developed Asian markets and towards
developing nations. Many of these will be nations that are currently not in a
position to consider more expensive and capital-heavy LNG over energy-dense oil.
They are centred in Africa and South America.
The Southeast Asian market will also be a contender for US LNG, but it
is likely to be predominantly supplied by Australia, Malaysia and Qatar due to
ease of access. The developing nations in each region are expected to be the
primary buyers of US LNG in future, as the developed nations that make up the
current market move away from a dependence on gas to greener power sources.
The Environment
With over 50Mt of capacity due for FID over the next 13 months, the US
is well placed to support the global transition to natural gas on the way to
net zero. As energy infrastructure in western Europe transitions away from
higher-emissions fossil fuels such as oil and coal, natural gas from the US
will stand ready to fill the void in base power load.
Countries are under increasing pressure to meet emissions reduction
targets, and globally there is increasing drive to invest in low- or
no-emissions solutions. The COP26 summit this month and more general political
sentiment are expected to provide greater clarity on US targets around
emissions and the country’s planned timeline.
The US is currently leading the way in the carbon capture and
sequestration (CCS) space, holding roughly a third of the market and still
growing extremely rapidly, with an annual growth rate potentially as high as
19%. CCS will be used to offset emissions regarded as unavoidable, whether from
baseload power, transportation or agriculture.
LNG will also play an increasingly central role in helping to supply
source fuel for the production of blue hydrogen. Some nations which are
beginning to invest in blue hydrogen, such as the UK, do not have a sufficient
supply of domestic gas to ensure the development of a new sector. While other
limitations are more pressing, this provides continued security to the US
export market.
The Competition
Easy access to both the European and Asian markets, a minimum of
expensive transit costs and inexpensive feed gas from shale wells puts the US
in an enviable economic position. The US’s primary competitors in LNG
production will remain Qatar, Australia and Russia.
Australia will see relatively little growth over the next decade. It is
expecting to maintain roughly 85Mtpa production but has secured strong
long-term contracts positioned in the Asian markets. Qatar’s upcoming 50Mt
expansion of the North Field project will see its output grow rapidly and
compete to service the European Markets, as well as taking the lion’s share of
any LNG investment in India.
Russia will primarily serve as a competitor via pipeline gas, though the
recently established Yamal LNG and upcoming 20Mt Arctic LNG facilities will
also directly compete with US LNG exporters to Europe. The Sakhalin-II project currently serves China,
South Korea and Japan due to its very close proximity to these countries, but
even with next year’s expansion to 15Mtpa, it does not have sufficient capacity
to supply the ravenous Asian market.
The Future
The US LNG industry will continue growing steadily as demand for natural
gas increases, with the green energy transition heading into full swing. The capacity
increases currently forecast will allow US gas producers to dominate a large
portion of the international LNG market, but producers run a high risk of
oversupply if green technology is adapted and implemented faster than
predicted.
While environmentalists remain skeptical of natural gas, citing its
nature as a carbon dioxide-emitting fuel, the emissions rate of natural gas is
half that of oil, and less than half that of coal. Renewables, as seen this year
in Europe, remain ultimately unreliable for national-level infrastructure, and
neither battery technology nor the hydrogen industry have been sufficiently
developed or implemented to fill the gap in energy storage that will be left by
the move away from fossil fuels.
LNG stands to fill that gap until these green technologies are developed
enough to stand independently, and the US will be a primary supplier of LNG.
Unfortunately, the massive current projection for US LNG growth is likely to
mean that the global market will enter a surplus, which will apply downward
pressure to international prices.