The United States’ continues its ascension into position
as the globe’s leading LNG exporter. Partly, this is
fueled by very cheap shale gas supply and vast
reserves, and partly by a sudden need for a new gas
supplier in Europe.
United Suppliers Ascendant
The Ukraine crisis has become a key element of the US confidence to accelerate proposals and confirm FIDs. US LNG exports grew 12% to take the top spot from Australia in the first half of 2022, and likely would have taken the crown but for Freeport LNG’s unplanned shutdown. The seven operational export facilities averaged an 87% utilisation rate (vs peak capacity) for the first half of the year, the same as 2021, but with greater capacity.
The startup of the 10Mtpa Calcasieu Pass LNG and 5Mtpa Train 6 at Sabine Pass LNG pushed US peak capacity to over 105Mtpa, and nominal capacity to 87Mtpa. Average production for the first half of the year was 329mcmpd, or 87Mtpa, a number expected to remain steady in the second half.
The loss of Freeport LNG’s 15Mtpa capacity from June to November is being matched by ramp up at the two new producing facilities. The early part of 2023 will see stronger national production as Freeport LNG returns to full production by March and Calcasieu Pass’ final trains complete construction and ramp up. US LNG capacity growth will stall through 2023 until new facilities come online in 2024.
The failure to progress permit reform will impede the construction of pipelines and development of new fields. Long term, this will increase feed gas supply and Henry Hub prices as increasing numbers of LNG facilities crowd pipelines that are approaching their transmission capacity.
The Eastern Front
In an unusual reversal of previous years, Asian buyers have been pressured out of the US market by Europe’s greater willingness to pay. European gas is at a modest US$2/MMBtu premium to Asian LNG prices in a reversal from 2021 and early 2022. September saw 87 cargoes leave US ports holding 6.3Mt of LNG, 70% (4.4Mt) of which headed to Europe. The share of European destinations has been growing, from July’s 56% and August’s 63% shares.
This growth has largely come as a result of Russia’s continuing cuts to its pipeline gas exports to Europe, now down to around 75mcmpd (equivalent to 20Mtpa of LNG) from 410mcmpd (110Mtpa) in 2021. In 2021, only 34% of US LNG exports, 19Mt, went to the EU.
2023 will be, if anything, worse for unsecured LNG buyers. Europe’s reduced gas supply will manage to struggle through the winter, but the massive fall in gas supply bodes ill for resupply ahead of the 2023-24 winter season. Europe typically consumes 60%-70% of its ~1100TWh (76Mt) gas storage capacity each winter. However, that is inclusive of a sufficient gas supply - one that is currently lacking.

US suppliers will be pressured to increase production to
peak capacity for an extended period throughout the
year to compensate for the missing pipeline supply.
Unfortunately, the roughly 50Mtpa the US is currently
exporting to Europe is insufficient to match the current
shortfall, let alone effectively restore its winter storage.
The Western Front
Asia has seen a rapid drop in LNG exports from the US
since 2021. The first half of the year saw a 51% drop in
exports to Asia, largely reduced by a lack of Chinese
spot market purchases. The residual impacts of Covid19 on China combined with high LNG prices have reduced the interest in the spot market for Chinese
buyers, imports falling over 80% year-on-year.
US spot cargoes appear to have lost their lustre, with
only 2.26Mt heading to Japan in the first half of the year,
compared with 4.2Mt last year, a drop of 47%. The
pressure will stay on both China and Japan as contracts
with the US have been historically limited and the US
LNG market is moving to secure long-term contracts.
China has almost become a competitor with the US, reexporting Russian LNG as tolled Chinese LNG while its
domestic demand is low. The country is purchasing very
little from the US as spot gas, preferring significantly
discounted Russian LNG (up to 50% off the spot price) it
can re-export to Europe at a profit.

Signing On
Both European and Chinese energy traders have moved
towards long-term contracts with US suppliers rather
than now-dubious reliance upon the spot market. A large
number of these new contracts are even for terminals
that have not been approved for funding or construction
yet.
Venture Global signed 11Mtpa of contracts out of its
Calcasieu Pass LNG and Plaquemines LNG facility with
China’s Sinopec and CNOOC in late 2021 and early
2022. ENN Natural Gas signed for 2.7Mtpa from
Cheniere for 20-year deals in March.
Germany has signed its first ever LNG offtake deal
between utility EnBW and Venture Global for 0.75Mtpa
from the upcoming Plaquemines LNG facility, and
another 0.75Mtpa from the prospective CP2 LNG. In the
first week of October, this deal has expanded to 1Mtpa
from each facility, for a total of 2Mtpa once the facilities
are operational. Both deals will last 20 years, securing
the facilities into the 2040s and minimising the risk of
stranded assets.
Sempra Infrastructure has organised three recent deals
with Europe. First, a 10-year 3Mtpa deal with PNGiG.
Second, a 15-year 2.25Mtpa deal with RWE, though the
heads of agreement has yet to be finalised. Finally, a
20-year 1.4Mtpa deal with INEOS, though it remains
non-binding. All three deals are associated with the yetto-be-confirmed Port Arthur LNG Phase 1 or Cameron
LNG Phase 2 projects.
NextDecade’s Rio Grande project will become one of
the largest LNG plants in the world at 27Mtpa over two
phases (16.2Mtpa Phase 1, 10.8Mtpa Phase 2), and
securing its offtake will be vital to acquiring financing for
the project. The company has secured a number of
long-term sales and purchase agreements. They
include:
- 1.75Mtpa to ENGIE for 15 years
- 1Mtpa to ExxonMobil for 20 years
- 1Mtpa to Guangdong Energy for 20 years
- 1Mtpa to China Gas for 20 years
- 1Mtpa to ENN Execute for 20 years
Combining to 5.75Mtpa, the combination of agreements
secures over 35% of Rio Grande’s first phase capacity.
Conclusions
The US LNG market is in a very healthy space with a
great deal of growth to come out to 2027. It relies on
continued cheap gas from the US fields in the Permian
Basin and the Appalachians, which are seen as low risk
for significant decline. Operators continue to finance
cautiously and with strong demand incentives pushing
buyers to lock in contracts, the risk of stranded assets or
unprofitability is minimal. US LNG is in an excellent
place.