| United States liquefied natural gas(LNG) supply to Europe |
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The production of liquefied natural gas (LNG) in the United States is gaining momentum following the rise in gas prices in world markets, according to S&P Global Platts.
- In the United States, the Calcasieu Pass terminal with a capacity of 12 million tons per year of LNG is put into operation. The Golden Pass (12 million tons), Plaquemines LNG (13.3 million tons), Corpus Christi (11.5 million tons) terminals are under construction. Completion of the projects is planned for 2023/25. The total volume of LNG produced in the USA will be 49 million tons/year. This is approximately 50% of Gazprom's supplies to Europe in 2021.Lake Charles, Driftwood LNG, Freeport Terminal Line 4, Texas LNG and Rio Grande LNG projects are being studied right now. Their total capacity will be 80 million tons/year. If these projects succeed, then theoretically the US can cover most of the EU's gas needs. But this amount will not cover the demand on other markets.
- The cost of gas in the US at the Henry hub for traders on long-term contracts is about $511 per 1,000 m3. The spot price of LNG at the same terminal is now approximately $2,734 per 1,000 m3. Traders who have long-term contracts for LNG production are now earning more than $2,200 per 1,000 m3 by selling gas directly from the terminal.
- With such a difference in prices, the cash flow of traders who receive LNG from a project like Freeport in a year could be about $29 billion, while the construction of the plant itself cost is $12.5 billion.
- While high inflation and pandemic-induced disruptions to supply chains make the previous US$600-800/t unit cost target for LNG plant construction in the US impossible, even a 3x higher cost at current prices would allow new projects to become profitable within 12 months or even less.
- The accident at the Freeport terminal on June 8 led to a reduction in LNG production. This terminal provided approximately 23% of all LNG produced in the United States. As a result of overpressure in the pipeline from the tank to the offshore export terminal, LNG leaked and ignited. News of the accident was one of the catalysts for further growth in gas prices in Europe. This news had a strong impact on the volume of investments directed for the construction and modernization of LNG terminals in the US.
- The European energy market is now being aggressively conquered by companies from the US and the UK. Turkey's proposal to create a gas hub on its territory is also aimed at the European market. The US and UK have been working for more than 10 years to push European buyers out of long-term contracts with Gazprom. Green energy served as a cover operation to achieve this goal. As they were pushed out, spot prices on the exchange raised. And now the US is increasing LNG supplies, taking advantage of the high prices. But to meet the demand for LNG in Europe, it is necessary to increase and modernize production in the United States. Under current conditions, all costs associated with this will be paid from the pocket of European consumers.
