Jan 26, 2020 by Jude Clemente
Really starting in February 2016, the U.S. liquefied natural gas (LNG) boom continues apace. The U.S. now has six export facilities online with 15 trains in service. In 2019, domestic LNG exports averaged around 5 Bcf/d, or almost 65% more than in 2018. U.S. LNG feedgas consumption averaged a record 8.0 Bcf/d in December. As our flagship, five trains are online at Cheniere Energy’s Sabine Pass in Louisiana and a sixth is under construction, with the facility averaging almost 4 Bcf/d of feedgas in December. For the year, capacity utilization at our terminals averaged almost 95% baseload and over 80% peak.
This past week, U.S. LNG feedgas hit a record 9.5 Bcf/d. This equates to over 10% of total U.S. gas production (see Figure 1). The surge in feedgas deliveries was driven by a ramp-up at Freeport LNG in Texas, Cameron LNG in Louisiana, and also Sabine Pass. Some 12-13 Bcf/d of feedgas demand will be reached by the end of this year. For comparison, U.S. gas for electricity averaged 31 Bcf/d, with industrial use at 23 Bcf/d. “EIA expects U.S. net natural gas exports to almost double by 2021.”
The U.S. accounted for over half of all new global liquefaction capacity added in 2019. Passing Malaysia, we are now the world’s third largest LNG seller, behind leader Australia and second place Qatar. Our rapid ascent is even more impressive since the global gas market has been oversupplied, and low prices generally work to make U.S. LNG less competitive. Moreover, the trade war with China has made it almost impossible to feed the world’s LNG sinkhole. With still a 25% tariff on our gas, China has not bought U.S. LNG since March 2019.
Looking forward, this year U.S. LNG feedstock deliveries will continue to mount in 2020. The remaining trains at Freeport, Cameron, and Elba Island will be placed into service, and a third train at Corpus Christi is coming in 2021. Some ~23 projects with a capacity of 35-40 Bcf/d are looking to ride the second U.S. wave of gas exports in another round of development. Continually bolstered by such low domestic prices that make our LNG highly attractive for the world’s importers, the U.S. is now on pace to be the largest LNG exporter by 2023. Just this past week, U.S. Henry Hub gas prices plunged below $2.00 for the first time since end of May 2016.
The boom in U.S. LNG exports really is: a giant global lifesaver. After all, natural gas is the go-to fuel for both rich and poor countries alike to lower greenhouse gas emissions and backup naturally intermittent wind and solar power. Rich Germany is a perfect example of this clear reality. The Germans have spent literally hundreds of billions of dollars incorporating wind, solar, and battery storage at all costs, yet Germany is now looking at building at least four LNG import terminals.
Without the U.S., the importing gas nations will be forced to turn to a global supply chain increasingly dominated by Russia and its Gas Exporting Countries Forum. U.S. policymakers should know that many of the world’s gas companies are endlessly backed by their own governments to grab natural gas hegemony. The “Natural Gas Triad” of Russia, Iran, and Qatar control some 60% of proven global gas reserves. Thus, U.S. LNG (and oil) exports are the ultimate anti-collusion weapon that we have in our arsenal: “U.S. LNG Can Punish Russian Meddling.” Oil and gas exports account for 40-45% of the federal budget for Vladimir Putin to play with.
Indeed, seeking to buffer Putin’s extending influence, U.S. LNG (“freedom gas”) exports to Europe boomed to ~2.0 Bcf/d in 2019, up from ~0.4 Bcf/d in 2018. Spain, UK, and France took 60%. U.S. LNG might be our best way to help friends. The International Energy Agency reports that U.S. LNG saved our European allies $8 billion in gas costs in 2018. Europe sensibly wants to double or even triple its U.S. LNG imports within five years.
But beyond Russia, more U.S. LNG is really a global moral imperative. We unacceptably live in a world where over three billion humans subsist using biomass (e.g., wood, dung) for cooking and heating, an indoor air pollution that kills over four million people per year. As the advisor to the rich OECD nations, the International Energy Agency has continually put more gas as the world’s centerpiece grand energy strategy to reduce emissions, grow the economy, and erase a horrific global poverty where six in every seven humans live in still developing countries.
This cannot be stressed enough this election year: the International Energy Agency has specifically cited more natural gas usage as to why the U.S. has been slashing greenhouse gas emissions to combat climate change faster than any country “in the history of energy.” U.S. LNG is critical to help others do the exact same thing.
Simply put, the “anti-shalers” stand on the wrong side of history.
Especially for those in the industrial sector, U.S. gas users must also realize some simple truths. More LNG exports beget more production to help keep our own prices low. This is exactly what has happened for the U.S. oil market. Despite flat domestic demand, our crude output has risen 50% since 2016, when a new law removed an export ban (U.S. crude exports have exploded six-fold since to average 3 million b/d in 2019).
LNG exports explain why the International Energy Agency projects that the U.S. will account for 35-40% of new gas output in the 2020s alone. Even with such low domestic prices, soaring U.S. gas reserves are the engine for our own domestic production and LNG boom (see Figure 2). The U.S. Department of Energy concludes that we have 1,025 trillion cubic feet of technically recoverable shale gas resources.