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U.S. natural gas exporters are forecasting a new wave of plans to take advantage of supply shortages in Europe and soaring world prices – even as the Biden administration says the goal remains to “move away” from fossil fuels.
This is a potentially dramatic reversal for the US liquefied natural gas export industry, which only last year slowed its capacity amid a pandemic-induced supply glut and battling doubts about the future of gas in a low carbon world.
“Yes, that’s a good thing for US LNG,” Charif Souki, chairman of Tellurian LNG – which hopes to build a new $ 15 billion export plant on the US Gulf Coast – told the Financial Times. reference to soaring world prices. “It will only depend on whether you can build the infrastructure in the United States or not.”
Analysts say that as developers regain confidence in the future of LNG, new construction will soon make the United States the world’s second-largest exporter of super-refrigerated fuel, after Australia.
âEven before the pandemic. . . it looked like we could have seen the last of the North American LNG FIDs, âsaid Amber McCullagh, director of energy consulting firm Enverus, referring to the final investment decisions to build more export plants.
Now McCullagh expects up to five new projects, including extensions to existing facilities, to be approved over the next two to three years. U.S. LNG export capacity could double if they were all brought online to about 20 billion cubic feet per day, from around 10 billion cubic feet per day in the first half of this year.
But the new capacity will not come soon enough to close Europe’s supply gap and avoid potential shortages this winter, a situation that State Department energy envoy Amos Hochstein recently said was putting âLives at stakeâ.
The US government, which has long touted increased US LNG exports for its geostrategic advantages as an alternative to energy supplies from Russia, is supporting increased supplies to Europe for the next two years – at least until ” accelerate the shift to cleaner fuels.
âWe need to have an eye on next winter and the winter after, to ensure that, while we focus on the energy transition, we are meeting the needs of today,â said Hochstein, who also worked for Tellurian. flight.
The current crisis “demonstrates the concern we have had for so many years about supplies to Europe,” Hochstein said, arguing that Russia was not doing all it could to mitigate the market collapse.
But he said the Biden administration’s overriding goal remains to reduce demand for natural gas as it pushes to decarbonize the energy system.
“This helps ensure that the supply is reliable and affordable over the next several years, while also accelerating the transition,” Hochstein added. “It’s a complex balancing act,” he said.
Whatever the longer-term energy demand transition, LNG developers say fear of shortages now underscores the need for more US gas in global markets.
Matt Schatzman, chief executive of NextDecade, which hopes to sanction a new export megaproject in Texas this year, said that “market conditions in Europe and around the world confirm that the call for LNG far exceeds supply. available “without new projects. NextDecade says it will capture and bury a large portion of its plant’s carbon emissions.
Mike Sabel, director of Venture Global, another developer, echoed the sentiment, saying US LNG will be “essential to meet this growing need and bring energy security to Europe and beyond.” Venture Global, which recently signed a major supply agreement to deliver gas to Poland, is building a plant in Louisiana and hopes to approve a second one this year.
Analysts remain cautious, however, saying that despite current global shortages, financiers and buyers alike should always be prepared to bet that demand for LNG – which requires huge upfront investments – can hold up in the long term in a crowded world. to burn less fossil fuels. .
âNever before has American LNG looked so good. . . but it’s not that simple when you go into the details, âsaid Alex Munton, analyst at energy consultancy Wood Mackenzie.
âSociety and politics are trying to get them away from writing a 20-year gas contract on their books. They have to sell it to investors who are basically saying, âWhat are you doing? You should be hip. ‘