The Race is On - New Long-Term Contracts Propel Multiple North American LNG Projects Toward FID

U.S. LNG is in the midst of a record-breaking year. Total LNG feedgas has averaged nearly 10 Bcf/d so far in 2021 and the country is on track to export somewhere around 1,000 cargoes this year, 40% more than last year. Although pipeline maintenance and flow constraints have knocked feedgas off the all-time highs seen earlier this year, feedgas and exports are likely to hit new record levels to close out the year as Sabine Pass Train 6 and Calcasieu Pass prepare to start service in early 2022. The strength in U.S. LNG export demand this year is underpinned by an incredibly bullish global gas market, which has led prices in both Europe and Asia to hit all-time highs. This has not only benefited the existing fleet of terminals, but the prolonged bullish global gas market has accelerated commercial activity for future LNG projects. Since May, more than 12 MMtpa of capacity from LNG terminals or liquefaction trains under development has been sold, pushing several prospective LNG projects closer to a final investment decision (FID). RBN covers all of the latest in our LNG Voyager Quarterly report, but in today’s blog, we take a look at some of the highlights from the report, focusing on the biggest changes in LNG development this summer.

Cheniere Energy is by far the largest owner and operator of U.S. LNG capacity, with 45 MMtpa across nine liquefaction trains at two terminals: the six-train Sabine Pass facility in Louisiana and the three-train Corpus Christi terminal in South Texas. But when Sabine Pass Train 6 was placed into service earlier this year, it marked the first time since 2012 that Cheniere had no capacity under construction. The pause may not last long. With global demand for LNG super-strong and prices even stronger — the April Dutch Title Transfer Facility (TTF) contract hit a record $72.53/MMBtu on March 7 — and Russia’s invasion of Ukraine threatening future supplies of Russian gas into Europe, Cheniere may be poised to make a final investment decision (FID) on the next stage of its Corpus Christi LNG. In today’s RBN blog, we continue our series on the next wave of U.S. LNG projects with a closer look at Cheniere’s Corpus Christi Stage III.

Appetite for new North American LNG export capacity had been waning already when COVID-19 brought it to a screeching halt. The global gas market was expected to be well-oversupplied through the mid-2020s as U.S. liquefaction capacity additions, combined with supply growth from Australian LNG projects, were far outpacing any increase in demand. However, the past year or so has proven how quickly things can swing from oversupplied to undersupplied. The extended run of high global gas prices is bringing renewed interest in expanding North American LNG export capacity. Although COVID dashed the prospects of many LNG projects, a handful have emerged from the morass of the past year stronger and with a clearer path to FID than ever before. Those that remain will be better positioned if they can navigate four emerging trends that are key for offtaker agreements in the post-COVID era: shorter contract terms, increased pricing or deal-structure diversity, reduced environmental impact, and a prioritization of brownfield expansions or phased greenfield projects. Today, we conclude the series on the status of the second wave of LNG projects.