There are no absolute certainties in the energy industry, but one thing a lot of people are betting on is increasing demand for LNG in Asia. A long list of countries there — China, Japan, and South Korea among them — have been shifting from nuclear and coal-fired power generation to natural gas, and as they do, their demand for LNG will be mind-blowing. The U.S. has emerged as a major supplier, but shipping LNG from the Gulf Coast to Asia involves either transiting the busy and costly Panama Canal or taking much longer routes through the Suez Canal or around the Cape of Good Hope. All of that has helped spur interest in developing LNG export terminals in western Mexico that would pipe in and liquefy Permian gas, then ship it straight across the Pacific Ocean. Today, we discuss plans for a large-scale liquefaction/export project aimed squarely at Asian buyers.
The global LNG market has been on a wild ride the past year or so. Last January, U.S. exports hit a new record as several Gulf Coast liquefaction plants came online. Then came COVID-related demand destruction and plunging LNG prices that wiped out the price spreads that justify exports. Toward the end of 2020, the international gas market firmed up on various supply outages and improved demand, sending U.S. LNG exports soaring to new highs. In addition to blogging about it, we’ve also been tracking LNG exports, arbitrage, and feedgas flows in our weekly LNG Voyager report.
But the news wasn’t all good: delays at the Panama Canal made it more costly and time-consuming to ship LNG to Asia, the biggest market of all. And so LNG developers have redoubled their efforts to bring cheap natural gas to the Pacific coast of North America. As we discussed in The Long Run, up north, Shell’s LNG Canada looks to take Montney gas west for export. (Also, Pembina Pipeline for years has been seeking to advance its Jordan Cove LNG export project in Oregon, though it was set back by a Federal Energy Regulatory Commission ruling earlier this week on a key state permit.)
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