LNG

QatarEnergies is working towards restarting some LNG trains at Ras Laffan, as shipping disruptions are anticipated to ease by the end of April. If the Strait of Hormuz remains closed until July or beyond, however, analysts reckon prices at the Dutch TTF gas trading hub would need to rise to well above 2022-levels for Europe be able to refill storages.

Shale gas production in the US is projected to surge by up to 40% as American supply fills the gap caused by force majeure on Qatari LNG shipments. Analysts expect US LNG to double, exceeding 30 billion cubic feet per day (bcf/d) by 2050.

US-Israeli air strikes against Iran has exposed Asia’s vulnerability to imported LNG and the lack of energy self-sufficiency through domestically generated clean energy. China, India, Japan and South Korea account for 75% of oil and 59% of LNG flows through the chokepoint.

If the Brent crude oil market begins to “flirt with contango,” OPEC+ will likely cut production, Rystad reckons. The primary goal of oil and gas producers remains maintaining a backwardated market structure, with crude prices impacting oil-indexed gas and LNG contracts.

Analysts have revised down Asian gas demand by 1.7 million tons after Chinese LNG imports fell 0.9 mt in a flatlining economy. The revision follows a 2.7 mt demand downgrade at the start of the US-China tariff war which impacts purchasing power and reduced LNG demand to 3.6 mt year-to-date.

Imports of Russian LNG into the EU have soared – regardless of sanctions – with most shipments headed to France, Spain and Belgium and a third of cargoes imported as spot trades. Analysts urge EU members states to prioritise on phasing out these flows.

Scepticism abounds as to whether US LNG exports projects will gain traction following President Trump’s executive order to resume approvals for LNG exports to non-FTA countries. Analysts see this move as a “reshuffling” of which pre-FID projects are most likely to be sanctioned – not as an actual change to the number of FIDs.

“US LNG projects compete in a global market, and each additional FID draws on additional, higher-cost supplies, eroding their economic competitiveness,” commented Rystad Energy’s senior vice president, Oil & Gas Research, Amber McCullagh.

To-date, American LNG projects largely rely on feedgas from the Haynesville shale, where the remaining Tier 1 inventory is limited and ownership of acreage is increasingly consolidated among the largest operators. Appalachia shale, in contrast, is home to the most untapped gas reserves – but moving these molecules to the coast for liquefaction and export is deemed “prohibitively expensive.”

“Trump is likely to push for permitting reforms, but such changes would require an act of Congress, which saw some bipartisan interest in the last session,” she noted, indicating the actual revision or withdrawal of former President Biden’s pause on approving non-FTA export licenses will be limited. Biden’s action halted momentum on several projects that had previously been close to taking final investment decision which sparked fierce criticism from the industry.

Outlook of gas-fired generation uncertain

Regardless of Trump’s rush to declare a ‘National Energy Emergency’ on his first day in office, analysts caution the President’s “drill, baby, drill” mantra overestimates the industry’s willingness to prioritize growth over investor returns in light of Tier 1 inventory depletion in core oil basins after 2030.

Speeding up permitting on federal land may incentivise some operators to produce more oil and gas, though volume growth is expected to be marginal and mostly used as feedgas for LNG export projects. Gas-fired power generation, on the other hand, may not benefit much as domestic gas prices are unlikely to recede sufficiently to make burning gas more competitive than unabated coal in some areas, let alone renewables.

“Trump signalled he would block new offshore wind leases, but these are unlikely to meaningfully impact the US generation mix,” McCullgah commented, adding: “Removing subsidies for wind and solar generation would have a more significant impact, but such a move would also require Congressional approval, and Republicans’ margins are very small in the House of Representatives.”

Nontheless, momentum in gas-fired generation is already in place, so rising domestic fossil fuel demand is likely – especially since utilities struggle to meet rising electricity demand from data centers and e-vehicles, and are hard pressed to provide sufficient dispatchable generation for balancing power.

Prices of delivered LNG into North-East Asia, the world’s premium gas market, are converging for oil-linked contracts and those indexed to the US Henry Hub. Most of recent term oil-linked deals for cargoes shipped to Asia have been in the 12.0%-12.5% DES range, while volumes available earlier from post-FID projects are attracting a premium.

As the Department of Energy (DOE) issued the first LNG export permit to non-FTA countries following a month-long pause, analysts forecast North America’s LNG export capacity could double by 2028 – if projects under construction begin operations as planned. The DOE just granted a permit to New Fortress Energy’s floating liquefaction plant offshore Altamira.

NFE had to delay shipment of the first cargo in July but subsequently exported several LNG cargoes from Altamira to countries with a free trade agreement (FTA) in place. Now, NFE has been authorized to also export LNG to countries that have no free trade agreement with the United States, which include all EU member states as well as Japan and India, among others. The permit is expected to boost Altamira’s exports to up to 1.4 million metric tons through to August 2029, a potential 3% rise.

Commenting on the recent permit for NFE’s Altamira LNG export terminal, assistant DOE secretary or the Office of Fossil Energy and Carbon Management, Brad Crabtree, noted: “These re-exports can diversify global LNG supplies and improve energy security for U.S. allies and trading partners.”

Despite this positive development, it needs to be said that NFE initially requested for their export term to last until the end of 2050 – twenty years longer than what they were granted by the regulator. This term will be re-evaluated in time, allowing NFE to file for an extension after a minimum of two years.

What’s in the making

North America’s total LNG export capacity is on track to more than double from 11.4 billion cubic feet per day (Bcf/d) last year to 24.4 Bcf/d in 2028. Over the coming four years, EIA analysts estimate LNG export capacity will grow by 0.8 Bcf/d in Mexico, 2.5 Bcf/d in Canada, and 9.7 Bcf/d in the United States from a total of 10 new projects that are currently under construction in these three countries.

Five US projects, with 9.7 Bcf/d capacity combined, that are currently under construction include Plaquemines (Phase I and Phase II), Corpus Christi Stage III, Golden Pass, Rio Grande Phase I, and Port Arthur Phase I. Developers expect to produce the first LNG from Plaquemines LNG and Corpus Christi LNG Stage III and ship first cargoes from these projects by the end of 2024.

In Canada, three projects with 2.5 Bcf/d capacity combined are in the making in British Columbia on Canada’s west coast – all supplied with natural gas from western Canada. Developers of the massive 1.8 Bcf/d LNG Canada plan to export a first cargo from Train 1 in the summer 2025. The 0.3 Bcf/d Woodfibre LNG terminal targets aims for a 2027 start-up while the 0.4 Bcf/d Cedar FLNG project reached a final investment decision (FID) in June 2024 and expects to start LNG exports in 2028.