Soaring global gas prices have sent a signal that more supply is needed. The US, soon to be the world’s largest LNG exporter, is responding to that demand, reports Wood Mackenzie.
“We have furnished the British great material support and we will furnish far more in the future. There will be no ‘bottlenecks’ in our determination to aid Great Britain.” President Franklin D. Roosevelt’s resounding commitment in 1940 to supply Britain with military equipment has been on people’s minds again recently, as other shipments from the US have been helping relieve a different kind of crisis in Europe.
The LNG boom is back
About 20 cargoes of US LNG are currently on their way to Europe, responding to soaring natural gas prices in the UK and EU that last month rose above $65 per million British Thermal Units. Alex Munton, Wood Mackenzie’s principal analyst for Americas LNG, says US exporters loaded about 100 cargoes last month. “US terminals are running red hot right now,” he says. “They are going as hard as they can.”
The arrival of additional US LNG will not end the pressure on European gas prices, which are being driven by a number of factors including the weather and concerns over supplies from Russia. But it does underline the emergence of the US as a leading player in the global LNG market, providing flexible supply that can be diverted to wherever prices are most attractive.
As gas prices in Europe have risen above prices in Asia, tankers have been diverted to take advantage. The Hellas Diana, for example, was reported to be near Hawaii, on its way from Texas to China, when it was turned round to go back through the Panama Canal and head for Europe.
Back in February last year, when LNG prices were higher in Japan and South Korea than in Europe, most US cargoes went to Asia. Now it is Europe that is the bigger draw. Over the past week, US LNG imports into Europe have averaged more than 250 million cubic metres per day, their highest level on record and equivalent to about 80% of total US LNG export capacity.
This year the US will become the world’s largest exporter of LNG, as new capacity comes on stream. The industry will also lay the foundations for future growth: construction of additional capacity is set to surge, with Cheniere Energy, Venture Global and possibly others expected to take final investment decisions on new projects after signing sales contracts last year. As Alex Munton puts it: “The LNG boom is back.”
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Source: Wood Mackenzie
