US LNG export projects compete for future demand gap

United States LNG export projects are not competing with current liquefied natural gas supplies, but for the gap that will exist in the future for the new demand around the world, Octávio Simões president of Sempra LNG & Midstream said. 

Speaking at the Flame Conference in Amsterdam on Tuesday, Simões said that by 2025 US export projects will produce over 90 million tons of LNG.

He noted that these production volumes do not even begin to cover recoverable reserves that currently stand at 1400 trillion cubic feet of gas.

With such potential, the issue now becomes execution, and security of gas supply, which will make the difference going forward. He added that the viability of future projects will depend on the structuring of the gas supply.

Simões discussed the placement of US liquefied natural gas in the future saying the expiring oil-linked contracts will create a future demand gap expected around 2025 where US produced LNG fits in.

Main differentiators for the placement of US LNG on the market are the requests by buyers for price transparency, flexibility in LNG supply and destination and above all security of supply, as utilities that are typical buyers, don’t want to sacrifice cost for reliability.

However, the issue which has not been discussed, according to Simões, is that, through the beginning of 2016, the oil majors have cut up to half a trillion dollars for new resource exploration, raising a question, where will the resources for new LNG projects come from.

The United States have a great potential to fuel new project developments, however, Simões, does not believe the US gas will be the only source.

Europe, that has seen a decline in domestic production, is the likely market for US LNG on Henry Hub US$3.9 price plus the delivery costs to Europe.

At current prices, US LNG delivered to Europe costs at about $6-7 mmBtu and at $7-8 mmBtu for Asia, he added.

LNG World News Staff