U.S. Liquefied Natural Gas industry is building a gap. It is because big companies like Exxon Mobil Corp and Cheniere Energy Inc race ahead to make export terminals without new long-term contracts. Also, smaller developers struggle to find financing for their plants.
LNG trade has commonly underpinned by long-term purchasing deals. These finances multi-billion-dollar terminals that liquefy natural gas by chilling it to -260 degrees Fahrenheit. They will load it onto ships, and regasify it when delivered.
As the market grows and pricing instruments diversify, some consumers do not want 20-year contracts. The growing ability of oil majors like Exxon, Cheniere, and other trading houses means some aggregators can supply buyers more flexible. Contrarily, this makes it harder for smaller players.
LNG export terminals are planning to build in the U.S. with a total capacity exceeding 300million tons per annum. That is equivalent to the world’s entire consumption of LNG last year. Also, global LNG demand expects to rise by 26% in 2024, far short of such an increase in export capacity.
Tellurian has been seeking shareholders for its 27mtpa Driftwood export terminal in Louisiana. Also, instead of trying to line up long-term purchase contracts, it offers consumers to invest in the company’s gas production, liquefaction, and pipelines.
Moreover, the firm delayed the start of construction to early next year. It also decreased its partners’ investment in the project to receive LNG to $500 per ton from $1,500 per ton.
Contrarily, Exxon and Qatar Petroleum agreed this year to move with their 15mtpa Golden Pass project in Texas. Also, Cheniere said it would expand its Sabine Pass terminal in Louisiana. Relevant long-term agreements directly financed neither.
U.S. Liquefied Natural Gas Delays
U.S. Liquefied Natural Gas buyers are wary in committing to long-term deals due to the inflow of flexible supply. Also, the decline in prices removed the urgency of buyers to sign deals.
The Final Investment Decision of Texas LNG already delayed from 2019 to 2020.
Chandra said their FID would be the end of next year.
Furthermore, U.S. developers had been thinking about signaling deals with customers in China. It will account for more than 40% of global gas consumption growth between 2018-2024. Also, they aim to become the top LNG buyer in 2024.
U.S.-China Trade War choked off overall demand from the country, once the third-biggest buyer of U.S. LNG. Besides for the first eight months of 2019, the U.S. exported 14% of the volumes it sent to China for the same date in 2018.
Greg Vesey, CEO of U.S.-listed LNG ltd says it is still a challenging market. The trade war with China has put a hindrance on deals in China.
Magnolia hoped to reach an FID last year but postponed that citing the trade war. Also, it has about 25% of its capacity under a long-term contract. Vesey said there is possible LNG ltd could make an FID this year.
Other delays include two Louisiana projects, which are Delfin LNG’s floating plant and Energy Transfer Lp’s Lake Charles LNG. They are both asked federal regulators for more time to complete.
Large projects from other countries are also striving for market share. It includes Russia’s Arctic LNG 2 and two projects in Mozambique led by Total SA and Exxon.
- Trading Instrument