Large volumes of new LNG supply will hit the market this decade, but none of the huge export capacities currently under construction will have time to relieve Europe’s tight gas market in 2023 or 2024. The US and Qatar, the world’s top LNG exporters, will have plenty of new capacity after 2025, easing the potential supply crunch but unable to help Europe with a new wave of gas supplies either next winter or for the next one.
Demand destruction due to high prices could reduce LNG consumption in the near term in both Europe and Asia. But even in a weaker demand scenario, Europe will need plenty of LNG to replace all the Russian gas it will have lost after the end of this winter and to build up adequate stocks ahead of winter 2023/2024.
The problem is that there won’t be much large-scale LNG supply from the US or Qatar until 2025. That leaves at least two years of a very tight global LNG market, during which Europe will scramble to import more and more. more non-Russian gas products. High prices may be here to stay, at least for another two years.
Meanwhile, Europe is doing good progress in setting up floating regasification storage units (FSRU) to import more LNG and developers are using more floating LNG platforms (FLNG) to export the fuel. But those floating facilities have smaller capacities than the huge land-based terminals major LNG exporters are currently building.
Massive US LNG projects coming up…after 2024
Three projects are currently under construction in the United States: Golden Pass LNG, Plaquemines LNG and Corpus Christi Stage III.
Once completed, these projects will expand U.S. maximum LNG export capacity by a total of 5.7 billion cubic feet per day (Bcf/d) by 2025, the EIA She said in the month of September. Therefore, the maximum export capacity in what is now the world’s largest exporter that sends around 70% of its LNG to Europe would reach almost 20 bcf/d by 2025, compared to around 14 bcf/d day today. The US is currently exporting around 11 Bcf/d, with Freeport LNG being out of service since June.
Related: Europe’s gas crisis subsides: Trafigura
Venture Global’s $13.2 Billion LNG Plaquemines reached up final investment decision in May and was the first US-based project to reach financial close since Venture Global’s Calcasieu Pass facility in August 2019. Venture Global has already entered into 20-year sales and purchase agreements for 80% of the entire MPA project.
QatarEnergy and ExxonMobil, the developers of Golden Pass LNG in Sabine Pass, Texas, said last month that the new LNG export facility was on track to start up in 2024. The companies announced they had agreed to independently commercialize the LNG produced in their joint venture. ExxonMobil will have exclusive rights to commercialize 30% of Golden Pass LNG volumes, while QatarEnergy Trading will commercialize the remaining 70%.
Cheniere Energy, the top exporter of LNG to the US, realized in June an FID for the Corpus Christi Stage 3 project, which is expected to “deliver much-needed volumes to the global LNG market by the end of 2025,” said Jack Fusco, Cheniere’s president and chief executive officer.
Other projects could also receive a positive FID in the coming months, considering high export prices and expectations of continued LNG demand in Europe, which is looking to move away from Russian gas by 2027.
Scramble for LNG supply could give rise to second wave of US LNG projects, but new supply will take time to develop, Kateryna Filippenko, Principal Analyst, Global Gas Supply, at Wood Mackenzie, She said earlier this year.
But much of this new LNG supply, even from projects that have taken FID in previous years, will likely arrive only after 2026.
Until around 2026, “Europe will have to compete with Asia for the marginal LNG molecule to meet demand, just as it is now,” Filippenko noted.
“Competition between Europe and Asia for limited LNG will be intense until a new wave of supply arrives after 2026. Prices will inevitably remain high until then.”
The world’s largest LNG expansion project in Qatar won’t be ready until 2026
In Qatar, the the largest LNG expansion in the world the project is expected to start production only in the fourth quarter of 2025.
Until then, long-term global LNG contracts before 2026 they are out of stockaccording to the main Japanese importer.
The short-term global supply response of LNG is weak, but record prices are triggering investment in new supply projects, London-based consultancy Timera Energy said in a analyses last week.
“The challenge is that the average project completion time is around 5 years,” according to analysts.
New supply next year and into 2024 is very limited, reflecting the pause in FIDs at the end of the last decade amid a lower price environment, as well as general headwinds for capital investment in fossil fuel projects.
“The new limited liquefaction capacity through 2025, combined with a jump in European demand, supports a continuation of the current regime of higher and more volatile prices over the next 2 to 3 years,” Timera Energy said.
US and Qatari projects will drive a substantial increase in new supply in 2025-2026. However, the dynamics of the LNG market from 2025 will depend heavily on the evolution of global LNG demand in the meantime, the consultancy noted.
By Tsvetana Paraskova for Oilprice.com
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