August 26, 2020 Read More →

LNG exporters expand capacity even as demand falls sharply

In a world awash in LNG, any news about more production capacity sounds illogical. Nevertheless, this is what U.S. energy companies are doing: they are boosting their production and export capacity despite a plunge in exports over the past few months.

Are they burying themselves in billions worth of liquefaction trains that will never return the investment, or are they cleverly playing the long game?

U.S. LNG export capacity was three times that of the actual exports last month, the Energy Information Administration said earlier in August. These have been falling since February, faster and faster, to reach just 3.1 billion cu ft per day from the February record-high of 8 billion cu ft per day.

“LNG prices are now far too low for U.S. exporters to make any profit, prompting many to simply shut off,” energy finance analyst Clark Williams-Derry from the Institute for Energy Economics and Financial Analysis told CNBC earlier this month. “It is not so much that the coronavirus crisis is going to last for a long time, it is more that the ‘new normal,’ post-Covid, may be one in which the U.S. LNG export dream seems out of reach,” he added.

Williams-Derry was the co-author of a IEEFA report about U.S. LNG’s future released in July which noted that the current fundamentals and price context has put the future of planned LNG capacity in question as buyers are increasingly reluctant to make the long-term commitments necessary for these projects to proceed. And yet, even the current LNG export capacity may already be too much. 

[Irina Slav]

More: U.S. LNG Exporters Are Adding Capacity Despite A Plunge In Demand

Posted in: IEEFA In the News

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