The Future for U.S. LNG Exports is Still Bright!

We’ve written in the past about the bright future for U.S. liquified natural gas (LNG) exports.  Though still shining, the industry has hit a few roadblocks, contending with the ramifications of Covid-19 and other unforeseen new challenges.  Thankfully, good news is on the horizon. 

U.S. LNG exports have been steadily growing for years now and rank only behind Australia and Qatar. That’s because America’s low-cost, dependable deliveries deliver global benefits. As a clean-burning fuel with high flexibility, natural gas-fired power has become an important part of the world’s energy mix, helping integrate solar, wind, and other intermittent renewable resources into power grids.  

Yet, LNG exporters are now dealing with a supply glut. A mild winter – compounded by lowered demand during the Covid-19 outbreak – has left storage levels higher than usual.  

The outlook? The non-partisan U.S Energy Information Administration now anticipates a 5% reduction in LNG exports for the second quarter of 2020, mostly due to consumer practices during the pandemic. These factors are contributing to a rapid price drop, bringing LNG prices to a 20-year low and creating a dreaded reduction in profit margin. 

There is a silver lining to falling prices, though. Low prices will likely advance gas-fired power as an attractive option for energy-hungry countries seeking low-cost, reliable power generation. Some national economies will inevitably need dependable imports from the U.S., not only to quench their thirst for affordable and reliable energy but also to reap the emission benefits LNG provides.

“I suspect there are going to be a lot of places and importers out there that once this immediate pandemic crisis evaporates, that they are going to be taking a look at natural gas and recognizing the long-term value that it can play in their energy future,” explains Dustin Meyer, the American Petroleum Institute’s director of market development. 

Not all problems confronting LNG exports are tied to demand though. Contracting disputes and construction delays to export terminals and liquefaction facilities have contributed to uncertainties in the LNG export industry. Of course, many of these problems existed before the coronavirus pandemic upended global supply chains and were primarily the result of steel tariffs and other economic factors. Despite all these challenges, however, this past week, four tankers left the U.S. carrying LNG exports to China for the first time in over a year. Hopefully there is more to come.

The U.S. LNG export industry clearly faces challenges. However, the growing energy sector has illustrated time and time again that it has the strength to adapt and continue pushing the U.S. economy forward. Emerging from the haze of Covid-19, the world will need affordable and reliable sources of energy to recover. American LNG can be part of the solution.