Report: U.S. LNG Exports Have Most Rapid Growth in Global Market

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Researched by Industrial Info Resources (Sugar Land, Texas)--A new liquefied natural gas (LNG) report by the U.S. Commodity Futures Trading Commission (CFTC) points out that growth in global LNG trade is expected to continue, with U.S. LNG exports having the most rapid growth rate. At the same time, however, growing U.S. LNG trade could expose the North American market to global market dynamics, which in turn could lead to higher U.S. natural gas prices. Industrial Info is tracking more than $236 billion worth of U.S. LNG project activity in various stages of development. Industrial Info assesses the likelihood of each project moving forward as planned.

Natural gas is one of the major derivatives markets under CFTC regulation, hence its interest in the impact of LNG exports.

Cheniere Energy Incorporated (NYSE:LNG) (Houston, Texas), and more recently, Dominion Energy Incorporated (NYSE:D) (Richmond, Virginia), are now exporting U.S. LNG, but the number of U.S. exporters is growing as global demand increases. For related information, see March 5, 2018, article - Dominion Exports First LNG Cargo from Cove Point and April 23, 2018, article - Delayed Freeport Startup Makes 2019 a Bigger Year for U.S. LNG.

"Over $30 billion in construction capital has been invested by the two firms with operational LNG plants [Cheniere and Dominion]. Further, significant investments in support of these plants have been made in new natural gas pipeline assets. The LNG firms and their customers use CFTC-regulated futures and swaps to manage investment, commodity, and operational risks. It is important for the CFTC and the public to understand the changing physical market dynamics. In this regard, the CFTC must foster stable, vibrant and liquid derivatives markets to support risk management practices," said Amir Zaidi, director of the CFTC's Office of Market Oversight, in a press release this week.

In 2016, the U.S. transitioned from being a net importer to a net exporter of LNG, notes the CFTC report. In aggregate, U.S. LNG export plants in operation and under construction have a capacity of 10 billion cubic feet per day (Bcf/d), which is about 13% of U.S. dry production. Within 20 years, the U.S. Energy Information Administration (EIA) forecasts that U.S. LNG exports will grow to 14 Bcf/d, while BP plc (NYSE:BP) (London, England) forecasts 19 Bcf/d, according to the report.

The report goes on to say that aside from limited pipeline gas traded with Canada and Mexico, U.S. natural gas has been relatively insulated from international market dynamics. Increasing exports of LNG from the U.S. may mean that the domestic market will be influenced more by global forces.

The growth in the global LNG market has been made possible by the rapid expansion of the global fleet of LNG tankers, with 31 new tankers added in 2016, bringing the total fleet to 478 vessels, double the number 10 years ago, according to the report.

However, growing U.S. LNG exports could encounter headwinds as a result of a trend toward indexing LNG prices to natural gas benchmarks, with less reliance on global oil benchmark exclusion clauses for physical LNG delivery contracts. The change toward gas-indexed pricing for LNG may put pressure on U.S. LNG exports, because U.S. natural gas has less of a pricing advantage against other natural gas supplies than it does against oil, according to the report.

Of the U.S. LNG projects being tracked by Industrial Info, Alaska Gasline Development Corporation's (Anchorage, Alaska) $15 billion LNG liquefaction plant on Alaska's Kenai Peninsula carries the biggest price tag. The project is assessed as having a low probability of moving forward as planned, but it recently received a potential boost when a gas sales agreement was announced between BP and Alaska, which was touted as a "historic milestone" in a lengthy effort to construct an 800-mile pipeline that would feed the LNG liquefaction plant. For more on the plant see industrial info's project report.

One of the U.S. LNG export facilities that is already under construction is Freeport LNG LP's (Houston, Texas) facility in Quintana, Texas, where four production trains with a combined investment of more than $15 billion are in various stages of development. Train 1 of the facility was originally planned to come online later this year, but startup has now been pushed out to September 2019. For more information on Train 1, see Industrial Info's project report.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.