WoodMac: 60 pct of US LNG supplies to land in Europe

Sabine Pass cargo loading (Image: Cheniere)

Europe is expected to be the number one destination for U.S. liquefied natural gas (LNG) supplies by 2020, consultancy Wood Mackenzie said.

Houston-based Cheniere started exports from the Sabine Pass liquefaction plant in Louisiana, currently the only such facility to ship U.S. shale gas overseas, in February last year.

Since then, it shipped more than 100 cargoes to various locations around the globe.

Many predicted a “flood” of U.S. LNG to Europe but only a small number of Sabine Pass LNG cargoes landed in Europe since February last year, better said in the southern part of the continent.

The bulk of these cargoes went to Latin America, Africa and Asia.

The U.S. is expected to become one of the world’s largest LNG suppliers by 2020 with an export capacity of about 60 million mt coming from five export terminals located along the Gulf Coast.

“Between now and 2035, the US will become an important LNG supplier and, by 2020, 60% of US LNG will find a market in Europe,” Wood Mackenzie said in a report published last week.

However, while demand is there, some US producers will be unable to recover the cash cost of shipping to Europe, as oversupply forces gas prices to stay low, the consultancy said.

“It is likely some US LNG will be shut-in on a seasonal basis until the mid-2020s,” it added.

According to Wood Mackenzie, volumes delivered to Europe will continue to increase to 2025 before falling once more as competition from other new LNG suppliers and destinations causes US volumes to be diverted elsewhere.

China to become world’s top LNG importer

China’s long-term growth potential remains considerable, despite recent downward revisions, Wood Mackenzie said in the report.

“Chinese gas-into-power demand will grow 366% from 2016 to 2035, as the country becomes the world’s largest importer of LNG, overtaking Japan whose gas-into-power demand will fall 33% as the nuclear fleet ramps up again,” it said.

In India, gas demand is projected to rise 156% from 2016 to 2035, or about 5% per year, according to Wood Mackenzie.

“India will account for only 3% of the global market by 2035, but nevertheless will be the world’s largest importer of LNG – a neat illustration of the increasing fluidity of the global gas market in the years to come,” the consultancy said.

Such varied growth in regional gas demand will make it difficult for supply and demand to balance without international trade, Wood Mackenzie noted in the report.

In addition, the distance between supply regions and centres of demand is fostering the growth of the global LNG market as a solution.

Wood Mackenzie expects that such significant change will herald a shift away from oil indexation in the gas market, creating more independent global hydrocarbon prices.

 

LNG World News Staff

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