Saturday, February 12, 2022

U.S. becomes world's largest exporter of liquefied natural gas (LNG)

The U.S. became the world’s No. 1 exporter of liquefied natural gas for the first time ever, as deliveries surged to energy-starved Europe. 
  • On Saturday, Febr. 12, 2022, all seven U.S. LNG export terminals had tankers docked or loading for the first time, with much of the gas headed to Europe.

  • Out of the roughly 60 LNG cargoes on the water, more than two-thirds are headed to Europe.

  • Demand for U.S. exports helped set a record 13.3 billion cubic feet of gas loading at the LNG export terminals.

Ship-tracking data compiled by Bloomberg: out of the roughly 60 LNG cargoes on the water, more than two-thirds are headed to Europe.

All seven U.S. LNG export terminals had tankers docked or loading for the first time,

A shale gas revolution, coupled with billions of dollars of investments in liquefaction facilities, transformed the U.S. from a net LNG importer to a top exporter in less than a decade. 

U.S. LNG export terminals sent out a record 1,043 cargoes in 2021, with Asian nations making up nearly half of the destinations and Europe making up one-third, ship tracking data compiled by Bloomberg shows.

Overall, Europe gets about a third of its natural gas from Russia. About a quarter of that gas travels via pipelines routed through Ukraine.

Supplies through Poland to Germany, through the Russian Yamal-Europe pipeline, have largely been shut down since December. As of late January, Russian gas supplier Gazprom (OGZPY) had cut flows of Russian gas through Ukraine to just a quarter of what they were in 2019, Citigroup estimated.

The Algeria/Spain Liquefied Natural Gas Connection
Europe faces other supply snags. Algeria is the third-largest source of natural gas for Europe, delivering about 18% of supplies. The bulk of that gas flowed through the subsea Maghreb — Europe pipeline between Morocco and Spain until early November. Then Algeria shut down the flow due to a dispute with Morocco.

Algeria has tried to make up the difference to Spain by increasing the flow through a smaller, alternate line into the country. It has boosted its LNG deliveries to the country, which is home to about a third of the LNG re-gasification capacity in Europe.

The liquefied natural gas shipments ease the energy hit taken by Spain, but they add further stress to an already tight global market.

While most natural gas comes to Spain from the south, half of Germany's supply comes from Russia.

Meanwhile, the U.K. receives about half of its natural gas from fields in the North and Irish seas. Another third is piped in from Norway, with much of the remainder shipped in as liquefied natural gas.

Europe's LNG Capacity
Russia, Algeria and Norway all send natural gas into Europe via pipelines. But any gas supplied from further abroad must arrive by sea. That involves a much more complex process.

Liquefied natural gas is natural gas that is piped into export facilities, where it is supercooled to -260°F. That converts it into liquid form, after which it is stored in cryogenic tanks. Companies like Flex LNG haul the fuel between continents in sophisticated LNG carriers, effectively massive refrigerated tanker ships.

At their destination, the liquefaction process is reversed. The LNG is offloaded and turned back into a gas via a process called re-gasification.

U.S. Takes Global LNG Export Lead
In the U.S., Cheniere is the leader in LNG production. It is rapidly rising to challenge the world's largest producer, Exxon's Qatargas partnership with Qatar Petroleum.

Cheniere (LNG) owns 49% of Cheniere Energy Partners (CQP). CQP, in turn, owns Sabine Pass, which is the largest U.S. export facility by a wide margin.

Cheniere expanded the Louisiana export facility, launched in 2016, to take advantage of the growing LNG markets. A sixth train, or liquefaction production unit, turned out its first export cargo in December.

Since the start of January, 50 ships have delivered LNG from the facility to Europe, about 70% of Cheniere's total output, according to comments made by Chief Executive Jack Fusco to Reuters.

Sabine Pass reportedly took in record gas flows of 5.1 billion cubic feet on Jan. 20 and 21, according to Bloomberg. One billion cubic feet of gas can supply one day's worth of gas to about five million U.S. homes. The site can produce 30 million metric tons per year of LNG, converting more than 4.7 billion cubic feet per day of natural gas into liquefied exports.

Cheniere's Calcasieu Pass export facility operates 18 trains, with total annual capacity of 12 million metric tons.

Asian Vs. European Spot Market
The U.S. is the world's largest supplier of spot, or flexible, LNG, according to Wyeno. That is thanks to export contracts that allow for destination flexibility.

Normally Asia receives the majority of global LNG spot cargoes because it is the premium-priced spot market during the winter. Japan and South Korea have little domestic natgas production and storage capacity and must import large quantities of LNG.

Last year China overtook Japan as the world's largest LNG importer. The U.S. is the second-largest supplier for China's fix, according to data from Kpler LNG, even as tensions between Washington and Beijing simmer.

But ahead of the Beijing Winter Olympic Games, Russia's Putin brokered a 30-year deal with Chinese President Xi Jinping to supply natgas to China via a new pipeline, signaling a strengthened alliance. The deal could buffer Gazprom revenue in the event of lost exports to Europe. Revenues from oil and gas sales fund a reported 40% of Russia's federal budget.

U.S. capacity
U.S. liquefied natural gas (LNG) export capacity has grown rapidly since the Lower 48 states first began exporting LNG in February 2016. In 2019, the United States became the world’s third-largest LNG exporter, behind Australia and Qatar. Once the new LNG liquefaction units, called trains, at Sabine Pass and Calcasieu Pass in Louisiana are placed in service by the end of 2022, the United States will have the world’s largest LNG export capacity.

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