US natural gas export fever tempered by costs and climate concerns

A ship moored at the pier off the coast of Louisiana is claiming its cargo of liquefied natural gas. Ice is formed on a pipe when chilled fuel extracted from distant fields like Texas or Pennsylvania is sent to the tanker’s isolated reservoir for shipment overseas.

Chenier Energy’s Sabine Pass export terminal is one of seven operating in the US, all operating non-stop to enter a global market desperate for energy.

Europe’s goal to cut dependence on Russian natural gas in response to the Moscow war in Ukraine should be a bonanza for LNG export companies in the US, the world’s largest gas producer. .

But the prospects for more than a dozen new U.S. sewage projects remain highly uncertain as construction costs rise, U.S. gas prices skyrocket and climate policymakers pursue long-term change away from fossil fuels and related emissions. Even the most advanced projects will take years to supply forever.

The US has started sending shredded LNG gas Six years agoFor a new supply released through freighting caused Cheniere to build an export infrastructure in Sabine Pass, which was originally designed to handle imports.

The total LNG capacity in the US now stands at 120 billion cubic meters per year. Three more plants that are expected to be online by 2025 will bring a new capacity of 70 billion cubic meters. Additional plants worth 206 billion cubic meters have federal regulatory approval but are awaiting final green light from their sponsors.

European Commission President Ursula von der Lane announced a deal with US President Joe Biden last month under which the EU would ensure long-term demand for another 50 billion cubic meters a year of LNG. The volumes will offset some of what 155 billion cubic meters of gas The EU imported from Russia last year.

“I think everyone has felt tremendous elation over the last three to four weeks,” said Dan Broilt, former US Secretary of Energy in the Trump administration and now president of Sempra Infrastructure, which owns most of the shares in Louisiana’s Cameroon LNG plant. . Europe’s attitude toward American fossil fuels has undergone a “sea change,” he said.

U.S. LNG executives now believe another wave of new construction may be imminent.

“The future of LNG in the U.S. is not on the table,” said Michael Smith, CEO of Freeport LNG, which operates an export terminal south of Houston. “Europe recognizes that they need LNG as opposed to believing they can get out of it [energy crisis] Only with renewable sources. . . That is a big positive step. ”

Jack Posco, general manager of Houston from Houston, said about Europe’s decision Include some natural gas in its green taxonomy And its decision to withdraw from Russian energy were “positive” signs of a more “realistic” view of LNG’s role in energy security and the shift to cleaner sources.

No one expects all of the proposed U.S. capacity to be built. LNG plants are expensive and take years to repay. Before they decide to go ahead, developers usually have to adjust purchase agreements with customers that last two decades or more, covering at least 80 percent capacity.

Analysts are skeptical that an EU guarantee or a rise in global LNG prices will eventually spur as much demand as project developers hope, given other efforts to move away from carbon-based energy. Brussels’s RePowerEU energy policy statement, released last month, was intended to break the dependence on Russian energy, but also spoke of a “faster reduction in the use of fossil fuels” in general.

Proponents of LNG in the U.S. say their fuel is a less carbon-rich power source than coal, meaning it can help reduce emissions quickly in some countries.

Project developers say they can add carbon capture technology to reduce emissions. Freeport has installed electric drives to run its gas leak process. But the long-term appetite of European power companies is still uncertain, analysts said.

“There’s a big customer out there who wants LNG, but you’m not really sure for how long,” said Nikos Tzafus, an LNG expert at the Center for Strategic and International Studies in Washington, referring to Europe. “If anything, they are trying to get out of the gas business very quickly.”

Supply chain disruptions and tight labor markets can also weigh on new capacity, India developers. The newest terminal to open, Venture Global’s Calcasieu Pass in Louisiana, went online in just 29 months, but other new projects are moving at a slower pace. The costs go up as inflation rips the US economy apart.

“We’re mostly a steel project,” Smith said. And steel [prices] They have doubled in the last two years. ”

Projects that could cost $ 500 million for every million tons of LNG capacity could be closer to $ 1 billion, Smith suggested.

U.S. natural gas prices are still a bargain compared to Europe or Asia, but they have recently soared to the highest level since 2008 and moved $ 7 per million to British thermal units. Strong flows to LNG export terminals are one force behind the jump.

A line chart of dollars per million Btu showing natural gas remains much cheaper in the US

LNG supply shortages mean “a bunch of rich developed economies are competing for the same small LNG pool,” said Clark Williams-Derry, an analyst at the Institute of Energy Economics and Financial Analysis. Poorer Asian countries that the global LNG industry relied on to drive growth may rethink their LNG import plans, he said.

For now, most of the U.S. LNG that can reach Europe is already sailing there, accounting for about 70 percent of exports this year. Its storage for next winter.

“I wish I had better news for Europe but it will take… At least five plus years to do anything of that magnitude,” Posco said.

Another report by Amanda Cho in Washington

US natural gas export fever tempered by costs and climate concerns Source link US natural gas export fever tempered by costs and climate concerns

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