US natural gas prices tripled from the 10-year average, now linked to global prices, with 7 LNG export terminals now operating and 15 more approved.
By Wolf Richter for WOLF STREET.
Exports of Liquefied Natural Gas (LNG) from the US to the rest of the world jumped by 18% over the first four months of 2022, to an average of 11.5 billion cubic feet per day (Bcf/d), compared to the annual average in 2021, according to the EIA today.
Exports of LNG have been increasing at huge rates – by 49% in 2021, by 31% in 2020, by 68% in 2019, by 53% in 2018, and by 279% in 2017. This growth comes as a function of the completion of new LNG export terminals.
The US has become the largest natural gas producer in the world. In 2016, large-scale LNG exports started, much of it shipped to Asian destinations, with China, Korea, and Japan at the top in 2021. But due to the massive demand from Europe so far in 2022, and higher prices at the trading hubs in Europe, US exports have shifted to European destinations.
In 2021, the US shipped 34% of its annual LNG production to Europe. But over the first four months this year, a massive shift occurred, when 74% of US LNG was exported to Europe, tripling the volume to 7.3 Bcf/d, and accounted for 49% of total LNG imports, according to the EIA today.
This shift from Asia to Europe was driven by spiking spot prices for LNG at European trading hubs that incentivized US exporters with destination flexibility in their contracts to ship LNG to the EU and the UK.
At the same time, LNG exports to Asia plunged by 51%, compared to the annual average in 2021, to 2.3 Bcf/d.
Exports to China have plunged from an average of 1.2 Bcf/d in 2021 to just 0.2 Bcf/d over the first four months in 2022, amid the lockdowns, a mild winter, and high US LNG prices. Exports to Japan and Korea also fell (chart via EIA, Europe includes Turkey):
Since Germany, which desperately would need the LNG, doesn’t have any LNG import terminals – though they’re now being fast-tracked – US LNG was shipped primarily to France, Spain, the UK, Turkey, and the Netherlands.
Surging Export Capacity.
There has long been a small LNG export terminal in Alaska. But the first large-scale export terminal began operating in 2016, by which time fracking had created a natural gas glut in the US, and its price had collapsed. LNG export operators arbitraged the cheap price of natural gas in the US and the much higher prices they could get globally by exporting LNG.
The increase in LNG exports in 2022 so far is the result of additional export capacity coming on line so far this year:
- Train 6 at the Sabine Pass LNG export facility added up to 0.76 Bcf/d of peak export capacity. Began operating at the end of 2021.
- The first five blocks of Calcasieu Pass. The facility will have 18 liquefaction trains with a total peak capacity of 1.6 Bcf/d. All of them are expected to be operational by the end of this year.
Operating LNG Export Terminals.
The small terminal at Kenai, Alaska has been operating for years; the other seven started operating in 2016 and later (FERC data):
- Kenai, AK: 0.2 Bcf/d (Trans-Foreland)
- Sabine, LA: 4.55 Bcf/d (Cheniere/Sabine Pass LNG –Trains 1-6)
- Cove Point, MD: 0.82 Bcf/d (Dominion–Cove Point LNG)
- Corpus Christi, TX: 2.40 Bcf/d (Cheniere – Corpus Christi LNG Trains 1-3)
- Hackberry, LA: 2.15 Bcf/d (Sempra–Cameron LNG, Trains 1-3)
- Elba Island, GA: 0.35 Bcf/d (Southern LNG Company Units 1-10)
- Freeport, TX: 2.14 Bcf/d (Freeport LNG Dev/Freeport LNG Expansion/FLNG Liquefaction Trains 1-3)
- Cameron Parish, LA: 0.74 Bcf/d (Venture Global Calcasieu Pass Units 1-4)
Future LNG Export Terminals.
In addition, there are three US export terminals that are approved and are now under construction, according to FERC:
- Cameron Parish, LA: 0.92 Bcf/d (Venture Global Calcasieu Pass Units 5-9) (CP15-550)
- Sabine Pass, TX: 2.26 Bcf/d (ExxonMobil – Golden Pass) (CP14-517, CP20-459)
- Plaquemines Parish, LA: 3.40 Bcf/d (Venture Global Plaquemines) (CP17-66)
And there are 12 US export terminals that are approved but not yet under construction, according to FERC:
- Lake Charles, LA: 2.2 Bcf/d (Lake Charles LNG) (CP14-120)
- Lake Charles, LA: 1.186 Bcf/d (Magnolia LNG) (CP14-347)
- Hackberry, LA: 1.41 Bcf/d (Sempra – Cameron LNG Trains 4 & 5) (CP15-560)
- Calcasieu Parish, LA: 4.0 Bcf/d (Driftwood LNG) (CP17-117)
- Port Arthur, TX: 1.86 Bcf/d (Sempra – Port Arthur LNG Trains 1 & 2) (CP17-20)
- Freeport, TX: 0.72 Bcf/d (Freeport LNG Dev Train 4) (CP17-470)
- Pascagoula, MS: 1.5 Bcf/d (Gulf LNG Liquefaction) (CP15-521)
- Jacksonville, FL: 0.132 Bcf/d (Eagle LNG Partners) (CP17-41)
- Brownsville, TX: 0.55 Bcf/d (Texas LNG Brownsville) (CP16-116)
- Brownsville, TX: 3.6 Bcf/d (Rio Grande LNG –NextDecade) (CP16-454)
- Corpus Christi, TX: 1.86 Bcf/d (Cheniere Corpus Christi Stage III) (CP18-512)
- Nikiski, AK: 2.63 Bcf/d (Alaska Gasline) (CP17-178)
The Price of Natural Gas in the US tripled.
So if US consumers, industrial users, and power generators are wondering why the price of natural gas is suddenly so damn high and roughly tripled from the 10-year average – after over a decade of having benefited from the collapsed prices during the natural gas glut (RIP) in the US – it’s because US natural gas prices are now increasingly arbitraged against global prices, and they’re much higher.
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