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Five U.S. LNG Export Projects Eyed for Sanctioning in 2020
Only two natural gas export projects have been sanctioned year-to-date in the United States, but there could be more than double that number in 2020, according to one of the nation’s experts.
Center for Liquefied Natural Gas (CLNG) Executive Director Charlie Riedl told an industry audience in New Orleans on Monday that five gas export projects are nearing a positive final investment decision (FID) next year.
Two export projects have been sanctioned this year, Golden Pass by ExxonMobil Corp. and Qatar in Sabine Pass, TX, as well as Venture Global’s Calcasieu Pass in Louisiana. There have also been some export expansions announced at other terminals. Look for five more next year, Riedl said at the inaugural Gulf Coast Energy Forum.
“Our best guess” as to what Lower 48 projects could reach FID in 2020 are all on the Texas and Louisiana coast, he said. Expected to get the green light are:
If sanctioning happens next year, all five projects could be moving gas beyond U.S. shores by 2024, Riedl said.
The United States has to keep moving its gas to foreign markets as demand here is no match, he told the audience. Domestic gas consumption today is estimated at about 27 Tcf/year, while gas production is approaching 60 Bcf/d in the Permian Basin, and Marcellus and Utica shales alone. There’s “more gas than we possibly know what to do with,” Riedl said.
CLNG was formed in 2001 as an advocate for LNG imports — a time before the widespread use of hydraulic fracturing and horizontal drilling. The advocacy group now works with operators to traverse the regulatory environment to move gas out.
“That sort of turnaround time, from when we were talking about having a deficit of gas in the United States to where we are today…is very short, very condensed and we are running as fast as we can to get more excess gas that we’ve got out of the United States and into markets where we need it,” Riedl said.
He described a recent trip to gas-starved Lithuania. It’s an “interesting dynamic to see the desire for gas there, and how much these markets that have been dependent on ”bad actors,’” such as Russia “that supplied gas for so long are anxious to get LNG from the U.S.”
“The reliability that we offer is just a different environment when you travel abroad to Europe…what we can provide on an international level” in terms of energy security.
“We’re very early on” in moving gas beyond U.S. shores,” he said. Riedl added that the country is “probably in the bottom of the first and the top of the second.” To date the United States has already exported gas to about 35 countries — and there are others that want more of it.
Riedl cited a report issued on Monday by GlobalData, which said between now and 2023, the United States is expected to add another 157 mmty of LNG capacity from 17 newbuild terminals. Russia is identified as second globally in terms of newbuild capacity additions with 18.7 mmty, followed by Canada with 14.6 mmty.
The reason the United States will lead, Riedl said, is the free market system.
“We’re exporting more gas than we ever have, and gas is cheaper than it’s ever been.”
More positive FIDs are needed for the United States to remain a big player, as “somewhere in the mid 2020s there’s going to be an intersection” when global LNG supply and demand finally balance. By then, there won’t be enough LNG export facilities, Riedl said.
“We haven’t worked in that environment yet. The price for gas in the U.S. has remained incredibly low and stable, and as far forward as you want to look, gas will continue to be that stable…”
Most of the U.S. exports this year to date have been directed to Europe.
“Big portfolio players” like ExxonMobil, Shell and BP plc are buying gas from LNG producers in the United States “and sending it to markets where it makes sense. That’s why we’re seeing so much gas go to Europe this year.”
There is another big reason that Europe has received more shipments, however. The U.S.-China trade war is having a big impact on gas exports, Riedl said.
CLNG has been a “vocal critic” of the Trump administration’s trade war, as it “has slowed our industry considerably…slowed contracts with buyers.”
During 2018, U.S. LNG export terminals sent 27 cargoes to China. This year, only three gas cargoes have reached China, he said.
“China is the largest consumer of natural gas in the world. We are the largest producer of natural gas in the world. it would make good sense to be sending LNG there,” Riedl said. “Tariffs have hurt our industry and slowed down our ability to do business, slowed FIDs. It’s difficult to get gas there right now. Tariffs have prevented that from happening.”
The LNG industry has been “collateral damage” in the Trump administration’s desire to punish China for intellectual property theft. “We support that, but the challenge from doing business with the Chinese has slowed our ability to grow.”
Of a potential trade agreement with China that is said to be in the works, Riedl said he hoped LNG exports would be part of it so that buyers could “come off the board so to speak and resume negotiations” for supply contracts.
However, Riedl said he was tempering his expectations for expanded LNG trade with China no matter what the result of the trade war is. Even with a trade agreement in place, “I don’t expect massive deals to be announced” with China but rather a slow turnaround. “Obviously, it will be good news for the gas industry when the deal is reached.”
China-based entities, he said, have been “told not to buy LNG. Until we begin negotiations again, that’s where we’re at. Until this is resolved at least from an LNG standpoint, I don’t expect to see any agreements with U.S. LNG producers.”
The U.S. gas industry also has been tossed and turned by environmental protests and legislation. For example, Sen. Elizabeth Warren of Massachusetts, who is running for the Democratic nomination for president, earlier this month introduced legislation with fellow Massachusetts Democrat Sen. Ed Markey to block construction on ports that export natural gas. She has alluded to a campaign against overall drilling in the Lower 48.
Although the bill is unlikely to move forward in the Republican-controlled Senate, it still serves as a warning, Riedl said.
Blocking gas production on public lands is possible, but “doing that on private lands would be very difficult,” as landowners have access to their mineral rights.
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