June 18, 2020 Read More →

Analysts see uncertain future for expected second wave of investment in U.S. LNG export projects

S&P Global Market Intelligence ($):

The expectation at the start of 2020 was another year of investment in U.S. LNG export infrastructure. Even though the market was a bit challenging, a slew of companies were racing to build enough commercial support to build new terminals, existing exporters were targeting major expansions, and it looked like a few developers might get their projects over the line.

But that was before the health and economic crisis of the coronavirus spread around the world, upending the outlook for U.S. LNG. Lockdowns aimed at halting the spread of the virus put such a hit on world oil and gas demand that the International Energy Association estimates it will take years to recover.

Gas prices plummeted to historic lows, making it unprofitable to ship spot U.S. LNG cargoes to Europe or Asia. Buyers canceled dozens of U.S. cargoes that would have loaded in June and July, causing a sharp decline in feedgas flows to export facilities that threatened to ripple through the domestic gas market even as new U.S. LNG capacity continues to come online.

The crash in oil prices delivered another blow by making U.S. LNG less competitive against other world supplies that are mostly linked to crude. The hard work of striking sufficient LNG supply deals to secure project financing suddenly became almost impossible, and commercial talks ground to a halt.

“What becomes more challenging is that the whole case for U.S. LNG exports was that the U.S. gas price was low, the international gas price was high, and there was a trade to be had,” said Nikos Tsafos, a senior fellow with the energy security and climate change program at the Center for Strategic and International Studies. “To me, it’s not obvious that you are going back to that world.”

[Corey Paul]

More ($): LNG Project Tracker: 2nd investment wave slips as pandemic roils gas market

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