The expected surge in liquefied natural gas export capacity in the United States is on course to boost gas consumption significantly, from around 18 billion cu ft right now to as much as 40 billion cu ft—and that 18 billion cu ft is already an all-time high.
The United States turned into the world’s largest exporter of LNG in a matter of years as energy companies raced to build new liquefaction trains along the Gulf Coast in response to the surge in demand for a lower-emission alternative to coal. Last month, the U.S. became the first country to export 10 million tons of liquefied gas in a single month, enjoying solid demand from Europe, which earlier this year signed a commitment to buy significant volumes of both LNG and oil to get President Trump to lower tariffs.
So, the U.S. LNG industry is already growing at breakneck speed, but it may just be the beginning of even more substantial growth, at least according to a senior executive of one of the biggest players in that field. That, in turn, could see higher natural gas prices at home.
Speaking at a recent industry event, Cheniere Energy’s chief commercial officer, Anatol Feygin, forecast the surge in natural gas demand from LNG plants from 18 to 40 billion cu ft and said this would drive natural gas prices higher, after they swelled by as much as 62% over the past year for the very same reason.
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“You kind of saw that in 22/23 coming out of COVID. LNG went back up to full utilization and then grew, so Nymex had an incursion into the high single digits. Very quickly supply responded,” Feygin said, as quoted by Reuters, suggesting natural gas producers are about to get braver with production expansion.
They may yet remain cautious, however, as analysts predict a slump in LNG prices next year as a consequence of all that new supply coming on stream, thanks to U.S. energy companies seeking to get a piece of the global LNG demand pie. Per these predictions, the global supply of liquefied gas would exceed demand growth, depressing prices. On the other hand, cheaper LNG would boost demand in energy-importing countries that are price-sensitive, such as Pakistan, for instance, or Bangladesh.
In fact, Cheniere’s Feygin said he expected the world to need a lot more new LNG production capacity in the coming year, record new supply from the U.S. notwithstanding, because of healthy demand growth—notably from the price-sensitive importing countries. The executive has pegged the necessary production capacity growth at an annual 30 million tons.
Of course, it is only natural for an industry to predict a bright future for its product. But Feygin and other executives are not the only ones seeing a surge in demand for natural gas in liquefied form. One analyst recently forecast that the United States could see its LNG capacity double between now and 2030 in response to global demand trends.
“In general terms, we are going to nearly double capacity from roughly 15.5 billion cubic feet per day (Bcf/d) now to over 30 Bcf/d by 2030,” Jack Weixel, senior director at East Daley Analytics, said as quoted by CME Group earlier this month. “If all projects proceed as planned, we should have at least 25 Bcf/d by 2028.”
This is a lot of new demand for gas, with analysts estimating the increase in LNG exports at 75% by that year. Such a development will inevitably push natural gas prices higher, while Big Tech’s AI push adds even more demand for the fuel, also driving prices higher. Indeed, record demand for U.S. LNG from Europe has already pushed prices to the highest in two years, CME Group noted in a report on the coming LNG boom. The average price enjoyed by U.S. LNG exporters this year has been $8 per thousand cu ft, according to data from the Energy Information Administration.
There is, however, one slightly inconvenient question that the current LNG situation raises, and that question is how long Europe would be able to afford U.S. LNG, especially with prices set to rise further in the coming years along with additional supply because of demand growth. Then there is something else: new gas production may become costlier, some warn, because gas producers are running out of the top-tier acreage, just like oil drillers. Others, however, are not worried, noting there was plenty of untapped gas underground, so supply response to demand developments would be speedy and keep prices from rising too high.
It seems, then, that the stage is set for a real LNG boom in the coming years—and it will not be just taking place in the U.S. because Qatar plans to have export capacity of 126 million tons annually by 2027. This will no doubt exert some downward pressure on prices, a very welcome development to price-sensitive LNG importers.
By Irina Slav for Oilprice.com
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