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SD...Fuel-Starved Europe Offers Push Needed for U.S. Gas Projects

Wed, March 2, 2022
(Bloomberg) -- The threat of supply disruptions in Europe, along with Germany’s pledge to build two new fuel-import terminals, could be the push U.S. developers need to move forward with the nearly dozen proposed liquefied natural gas projects.

Europe was already fuel-starved, and the war in Ukraine is compounding the strain. Shell Plc and U.K. energy supplier Centrica Plc are among companies saying they’ll exit Russian gas-supply agreements or ventures, helping send natural gas prices surging 60% to a fresh record on Wednesday in one of the most dramatic examples of the fallout rippling through commodity markets from the war in Ukraine.

The jump in gas prices comes even with LNG producers in the U.S., the world’s biggest exporter, running flat out and sending flotillas of cargoes to Europe through this winter. The crisis, along with German Chancellor Olaf Scholz’s comments that Germany would move quickly to build two LNG terminals to cut dependence on Russian gas, could help spur financing and approval decisions for U.S. LNG developers.

Germany’s decision “is a complete game changer,” said Fred Hutchison, chief executive officer of the Washington-based trade association LNG Allies. “We’ve been working with various parties in Germany on that issue since at least 2018. The problem, if there is one, is that building terminals to receive more U.S. LNG is meaningless if there isn’t more U.S. LNG.”

Price disparities between North America and Europe show how natural gas in the U.S. is still largely locked in with exports maxed out. U.S. natural gas futures have risen about 4% over the past week, while gas in Europe has surged more than 80%.

In the Works

There are almost a dozen U.S. LNG export projects that hold federal permits but lack enough contracts to finance the billions of dollars of construction.

Citigroup Inc analysts listed expansions at Corpus Christi LNG, Freeport LNG and Cameron LNG as the most likely to succeed, along with new construction such as Plaquemines LNG, Driftwood LNG and Rio Grande LNG. Their combined capacity of 66 million tons is more than 15% of the current global LNG market, and would be enough to displace 40% of the amount of natural gas Russia sold to Europe in 2019.

Corpus Christi Stage III is expected to reach a final investment decision this summer. Cameron Train 4 is projected to be complete third quarter 2027 and still needs a regulatory permit, contracts and a final investment decision. Freeport LNG Train 4 has a FERC permit but needs offtake agreements and a final investment decision.

European demand and growing production capacity helped make the U.S. the world’s top LNG supplier for the past three months. Out of about five dozen U.S. LNG cargoes currently on the water, nearly two-thirds are headed to Europe. The group included a shipment from Venture Global LNG’s newly built Calcasieu Pass export terminal in Louisiana, which sent out its first cargo early Tuesday.

Given the growing demand in Europe, the natural gas industry and LNG developers are putting pressure on the Biden administration to speed the permitting and approval process for export projects and to remove barriers to domestic production and pipeline projects.

“It’s disappointment that we as a country have not been able to get more LNG facilities built,” said Rick Muncrief, chief executive officer of shale explorer Devon Energy Corp.

The anticipated completion of Calcasieu Pass this summer is expected to raise the amount of natural gas being converted to LNG to a peak of 13.9 billion cubic feet per day, or roughly 15% of domestic natural gas production.

Also in the works is Golden Pass LNG, a joint venture in Texas between Exxon Mobil Corp. and Qatar Energy that’s expected to be completed in 2024.

With global natural gas demand increasing faster than supply, the outlook is optimistic for U.S. shale and LNG developers, said Artem Abramov, head of shale research at Rystad Energy.

“This conflict, though terrible for everyone involved, is a positive story for the U.S. LNG export potential,” said Artem Abramov, head of shale research at Rystad Energy. “Europe clearly indicated they are ready to accept higher prices and reduce dependency on Russian gas, which opens up the market for U.S. LNG.”
Sergio Chapa
https://finance.yahoo.com/news/threat-europe-gas-supply-bolsters-180411610.html