U.S. Study Finds LNG Demand Centers Shifting

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--While the U.S. has supported global energy security by way of exports of liquefied natural gas (LNG), export destinations are shifting toward Asia as Europe backs away from fossil fuels, a U.S. government study found.

Supported by its vast natural gas reserves, the U.S. emerged as the top exporter of LNG, just as the European economy was looking for alternative suppliers in the wake of the Russian invasion of Ukraine in 2022. Europe had relied on Russia for about a quarter of its gas needs, but Western sanctions sidelined that supply stream following Russia's invasion.

A study from the U.S. Department of Energy found Europe has been the primary destination for U.S.-sourced LNG since 2016, though European policies aimed at reducing the use of fossil fuels could change that.

"China has recently become the largest global importer of LNG and has signed several contracts with operating or proposed U.S. LNG projects," the study found. "China is expected to have the highest LNG imports of any country across all scenarios in 2050."

China is the second-largest economy behind the U.S. Both sides are adversarial, though they recently brokered arrangements that brought each party back from the brink of an all-out trade war.

The study was published in December, at the tail-end of former President Joe Biden's tenure. Biden had paused new permits for LNG export terminals while the administration studied the potential for emissions up and down the supply chain, though that order was paused by the courts and later overturned by Trump in one of his first acts in his second term.

"President Trump was given a mandate to unleash American energy dominance, and that includes U.S. LNG exports," U.S. Energy Secretary Chris Wright said Monday. "The facts are clear: Expanding America's LNG exports is good for Americans and good for the world."

The study, however, found that higher export levels of LNG will lead to higher U.S. residential gas prices, which could increase by as much as 7% between now and 2050. Henry Hub, the U.S. benchmark for the price of natural gas, already is elevated relative to year-ago levels, and by next year could see the average double from 2024.

The International Energy Agency, meanwhile, had warned that the increase in new LNG projects could lead to a market glut that would persist well into the 2030s, though the Energy Department believes domestic resources are adequate to support the domestic LNG potential.

The World Bank said that looking at LNG as a bridge to a cleaner future is somewhat misguided, due to the prevalence of methane emissions within the supply chain.

The Energy Department study, meanwhile, found that global gas demand would be lower when assuming global policymakers are working to limit climate change, or deploying supplementary resources such as carbon, capture and storage.

Data from IIR Energy show the amount of natural gas feeding the eight operational LNG export terminals in the U.S. is running at about 15 billion cubic feet per day (Bcf/d), which is the average level of exports expected this year. Feedgas levels have been volatile due to regular spring maintenance after surpassing 16 Bcf/d earlier this year.

The Energy Department expects LNG exports to reach 16 Bcf/d next year, possibly jumping to as high as 56.3 Bcf/d by 2050.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).