U.S. LNG exports are soaring to record highs. By the end of next year, the number of major operating U.S. LNG export terminals will at least triple
Some U.S. Liquefied Natural Gas (LNG) news this past week was indeed bleak. Previously exempt from the trade spat, China announced plans to put a 25% tariff on imports of U.S. LNG. China has accounted for about 13-15% of the exports from our flagship LNG terminal, Cheniere Energy’s Sabine Pass in Louisiana, since operations started in February 2016. China, of course, is the world’s largest incremental gas market, now only using a third of what the U.S. consumes, despite having over four times the population. Last year, China surpassed South Korea to become the world’s 2nd largest LNG importer and actually surpassed leader Japan for the month of May.
But, there was also great news for the industry during the week: U.S. LNG exports are soaring to record highs . EIA data notes that six LNG vessels with a combined capacity of 21.6 Bcf left the U.S, five from Sabine Pass and one from Dominion Energy’s Cove Point in Maryland. For July, 30 LNG cargoes left the country, and we saw the highest exports in our history. EIA reports that 23 of the cargoes shipped out of Sabine Pass, with the rest leaving from Cove Point. Overall, we had a total export volume of nearly 105 Bcf. As a backdrop, we were one of 19 global LNG exporters in 2017 and accounted for 5% of the almost 40 Bcf/d global LNG market – up from nothing just a few years ago.
Yet, the future still shines even brighter. By the end of next year, the number of major operating U.S. LNG export terminals will at least triple to six . Importers seek the flexible contracts, transparent hub-based pricing, and spot sales that our industry deploys, not to mention craving access to the massive and ever-growing U.S. gas production complex that is 30% larger than 2nd place Russia.
And we are obviously looking East. In operation or under-construction, the U.S. has sold around 45% of its yearly LNG output to Asia, mostly to Japan and South Korea. But the reality is that both are mature energy demand markets and both have declining populations. To illustrate, Japan’s nuclear restart and large renewable build could lower LNG imports by 20% or so over the next five years. South Korea might be a better option but is still slow-growing: “LNG consumption growth at 0.81% annually over the next 13 years, well below an annual average rate of 5.1% the past 13 years.”
Turning to the other key LNG buying area, the recent meeting between U.S. President Trump and European Commission President Jean-Claude Juncker could help ease the pain of a trade war but many countries there also have declining populations and new gas demand is limited. Last year, for instance, Europe’s LNG import utilization was just 25-30%. Russia will remain tough competition: “Europe to pay 30% more for US LNG, Russia’s EU envoy warns.”