U.S. Could Be the World’s Largest LNG Supplier by 2035

LNG demand to grow by 4-5% per year through 2030

LNG has grown significantly in the past decade, and is poised to grow even more in the next 20 years. While the vast majority of LNG has historically been supplied by Qatar and Australia, new projects coming online will bring the U.S. into the market.

Cheniere’s (ticker: LNG) Sabine Pass terminal, in Louisiana, is a massive new LNG facility. Created by Charif Souki, Cheniere’s founder and former CEO, Sabine Pass’s 3.5 Bcf/day is expected to supply 9% of the global LNG market in 2020. Souki’s current company, Tellurian Inc. (ticker: TELL), which recently went public through a reverse merger with Magellan Petroleum, has LNG facilities in the planning and development stages. Tellurian’s Driftwood LNG, also in Louisiana, has a planned 3.6 Bcf/day of capacity. Currently awaiting regulatory approval, Driftwood is expected to come online in 2022. Tellurian was the beneficiary of recent cash infusions from GE and Total.

Souki believes that the U.S. will anchor LNG prices in the future. In an interview with Forbes, Souki estimated that gas from the U.S. could be bought, chilled and transported to Asia for $7-$7.50 per MMBTU. With LNG in Japan and Korea at $8 currently, this would leave a reasonable profit margin.

BP: U.S. will be world marginal supplier of LNG

BP (ticker: BP) reached similar conclusions in its Energy Outlook 2017. BP predicts that LNG supply in the US will grow by 19 BCFPD in the next 20 years, making the US the world’s largest LNG exporter. While LNG currently makes up about 32% of all globally traded gas, this share will grow to half by 2035. This shipping infrastructure will allow gas markets to increasingly become integrated. Instead of the current significant spread in global gas prices, prices will be much more uniform.

According to BP the U.S.’s geographical position will also contribute to its potential role as the marginal supplier for the world. While Australian LNG is expected to be almost entirely to Asia, U.S. LNG will likely go to Europe, Asia and South & Central America.

LNG market not oversupplied: Shell

Shell’s (ticker: RDS.A) LNG Outlook, released Feb. 20, also predicts a tremendous increase in LNG supply over the next 15 years. Shell projects that by 2020 the global LNG trade will have grown by 50%, compared to levels in 2014. Demand for LNG will grow by 4% to 5% per year through at least 2030, according to the report.

World governments, seeking to decrease power sector CO2 emissions, are increasingly turning to natural gas for fuel. China and India have significantly increased their LNG demand, increasing imports by a combined 1.5 Bcf in 2016, according to Shell.

While many analysts have predicted that the LNG market would be oversupplied, it appears that this may not be so. According to Shell, LNG spot prices as a proportion of oil prices were very similar in 2016 and 2015, suggesting that LNG maintained its competitive position.

LNG export projects in the U.S.

Cheniere was first to ship cargoes of LNG. Its Sabine Pass terminal began operation in February 2016, with a total permitted capacity of 4.16 Bcf/d.

According to EIA data, four other LNG export terminals are currently in the construction phase:

• Dominion Energy’s Cove Point LNG facility in Cove Point, Maryland, is scheduled to bring one train totaling 0.82 Bcf/d online near the end of 2017.
• Corpus Christi LNG, another Cheniere project, is under construction in Corpus Christi, Texas. The terminal is scheduled to begin service in 2018, with total permitted capacity at 2.96 Bcf/d
• Sempra Energy’s Cameron LNG terminal, located in Hackberry, Louisiana, is under construction and is scheduled to bring three trains online in 2018. A total of 2.1 Bcf/d has been permitted.
• Freeport LNG’s terminal planned for Freeport, Texas, has three trains under construction totaling 1.8 Bcf/d. The first is scheduled to begin service in 2018, and the second and third in 2020.

Who’s been applying to import and export natural gas?

The U.S. Department of Energy’s Office of Fossil Energy is the hub for applications to import and export natural gas. The department tracks the applicants, applications and actions on its website. The applications to import and export natural gas and LNG listed by the agency for 2016 appear below, listed as orders issued by the Office of Regulation and International Engagement at the Office of Oil and Natural Gas.