LNG development

It has been an epic year for U.S. LNG. After COVID-19 and the subsequent global market crash brought LNG development to a standstill and shut-in production from existing terminals in 2020, this year has seen global prices repeatedly smash previous record highs, driving existing terminals to operate at peak levels and renewing interest in new LNG buildout. U.S. feedgas demand and LNG production will close out the year at all-time highs, but with just a few weeks left it looks like 2021 will be the first year since 2017 that no new LNG terminals will achieve a positive final investment decision. But that’s driven more by the tailwinds of 2020 — the back half of 2021 has seen a tremendous amount of commercial activity in the LNG sector. More than 21 million metric tons per annum of medium- and long-term capacity from planned LNG projects has been sold this year, creating enough forward momentum for multiple projects to move toward FID in 2022. We cover all the latest developments in our LNG Voyager Quarterly report, and in today’s RBN blog we take a look at some of the recent LNG deals and what they tell us about the future of North American LNG.

It has been a chaotic couple of years for North American LNG and the global gas market. In a short time, international gas markets went from oppressively oversupplied balances, high storage inventories, and historically low prices for much of 2020 to reckoning with panic-inducing supply shortages, low inventories, and multi-year or all-time high prices in the biggest LNG-consuming regions. The resulting whiplash has transformed key aspects of the LNG market, making a profound impact on the way existing LNG terminals operate, how projects secure funding and capacity commitments, and what offtakers expect for the next generation of LNG capacity buildout. The tight market appears to have settled the question of whether more export capacity is needed, at least for now, but the market’s sharp U-turn has also put potential offtakers on edge and underscored the need for contractual flexibility. Additionally, pressure to reduce greenhouse gas (GHG) emissions is higher than ever, and LNG offtakers are increasingly demanding greener solutions to address government regulations and public concerns. This convergence of factors has put the LNG market at a crossroads. Taking all of the lessons learned from the last two years and before, the industry must now forge a new path forward. In the encore edition of today’s RBN blog, we discuss highlights from our recent Drill Down report, looking at the major trends that will define the North American LNG market in the coming years.

After a record-breaking year in which the Japan-Korea Marker topped $30/MMBtu, it looks like 2022 could finally be the year when multiple projects in the long-awaited “second wave” of North American LNG export facilities reach final investment decisions. Developers, financiers, and offtakers are all taking their time, however, to make sure projects make sense in the long term. The recent run of high prices comes after years of price declines and a COVID-related price collapse in 2020, which reduced the spreads between U.S. production and LNG destination markets, slowing the pace of LNG project development. One thing’s clear: Asia — always the focus of LNG demand growth — will become even more important going forward, and perhaps the best way to attract Asian offtakers to U.S., Canadian, and Mexican projects is to export from the Pacific Coast, assuming that feedgas can be sourced and delivered easily. In today’s RBN blog, we conclude our series on Pacific Coast LNG export development, this time focusing on projects in Western Canada.

After years of waiting on the so-called “second wave” of North American LNG, 2022 could finally be the year that sees multiple LNG export projects reach a final investment decision (FID). Global gas fundamentals have been bullish for about a year, and prices hit record highs throughout the summer and fall. Offtakers around the world are clamoring and competing for LNG cargoes, anticipating a volatile and undersupplied winter. But with Russian piped exports to Europe expected to increase dramatically as the controversial Nord Stream 2 pipeline finally comes online, likely early next year, North American LNG is looking for ways to be more attractive to Asian offtakers. One option on the table for North America is to go west and export from the Pacific Coast, which cuts the voyage time to Asia in half. Exporting from the Pacific Coast is not without its challenges, however, including where and how to source the feedgas required for liquefaction. In today’s RBN blog, we continue our series looking at Pacific Coast LNG export developments, this time focusing on feedgas and infrastructure for the LNG projects in Mexico.

For years, industry experts warned that the global LNG market was entering a period of extreme oversupply that would last until mid-decade. And up until late last year, that bearish scenario seemed to be materializing. Global gas prices had fallen as more LNG export capacity came online, and then COVID-19 decimated global markets and caused existing LNG terminals to shut-in production. But just as quickly as it collapsed, the market flipped. The world is now left scrambling to secure LNG/gas supply ahead of the heating season and global gas prices have hit record highs in recent weeks, signaling a turbulent winter ahead. Suffice it to say, utilities and governments have energy security and reliability on the mind, not just for prompt winter but for the longer term, and that pressure is unlikely to let up anytime soon. That’s brought previously commitment-wary LNG offtakers back to the negotiation table for new LNG export developments — cautiously and with a sharpened focus on de-risking long-term commitments amid heightened uncertainty. One way to do just that is to capitalize on the economic advantages of North America’s Pacific Coast projects. In today’s RBN blog, we continue our series looking at the state of LNG development on the North American Pacific Coast.

With multiple energy markets around the world facing natural gas shortages, buyers are clamoring for more LNG. Pre-winter panic-buying has sent global gas prices to record highs yet again in the past couple of days, and even hauled Henry Hub gas futures up to new post-2008 records above $6/MMBtu in after-hours and intraday trading. With the incredible run in global gas prices, U.S. export economics have looked extremely attractive for nearly a year now, and you would think that buyers would be lining up for new liquefaction capacity in the U.S. Well, it has certainly drawn prospective offtakers back to the table. But they are wary of rising export costs and committing to projects long-term given the questionable future for hydrocarbon markets. Additionally, Europe’s rising piped gas imports from Russia and overall declining demand in the region have put long-term prospects for European LNG imports, in particular, on shaky ground. So, access to Asia is more important than ever for new LNG development, a key selling point for projects on North America’s Pacific Coast, both because of proximity to Asian markets and the absence of canal fees or constraints versus the Gulf Coast. There are no LNG export terminals on the Pacific Coast currently, but two projects — LNG Canada in British Columbia and Sempra Energy’s Energía Costa Azul (ECA) LNG in Baja California, Mexico — are under construction and due online mid-decade. Those projects are unlikely to be the last, given the more than $1/MMBtu in cost savings due to shorter voyage times and canal-free access to Asia. In today’s RBN blog, we begin a series looking at the state of LNG development on the North American Pacific Coast.

It has been a chaotic 18 months for North American LNG and the global gas market. In a short time, international gas markets went from oppressively oversupplied balances, high storage inventories, and historically low prices for much of 2020, to reckoning with panic-inducing supply shortage, low inventories, multi-year or all-time high prices in the biggest LNG-consuming regions. The resulting whiplash has transformed key aspects of the LNG market, including making a profound impact on the way existing LNG terminals operate, how projects secure funding and capacity commitments, and what offtakers expect for the next generation of LNG capacity buildout. The tight market appears to have settled the question of whether more export capacity is needed, at least for now, but the market’s sharp U-turn has also put potential offtakers on edge and underscored the need for contractual flexibility. Additionally, pressure to reduce greenhouse gas (GHG) emissions is higher than ever, and LNG offtakers are increasingly demanding greener solutions to address government regulations and public concerns. This convergence of factors has put the LNG market at a crossroads. Taking all of the lessons learned from the past 18 months and before, the industry must now forge a new path forward. Today, we discuss highlights from our new Drill Down report, looking at the major trends that will define the North American LNG market in the coming years.

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.