“Is it not something that the market would achieve anyway, if we extrapolate what we have seen in early 2022 so far and assume that European gas prices will stay at a premium given the geopolitical situation?” Anne-Sophie Corbeau, global research fellow at Columbia University’s Center on Global Energy Policy, was by no means the only gas market analyst less than enthusiastic about a late-March US promise to help ensure delivery of an incremental 15bn m³ to the EU this year.
Given that only around half of US LNG contracts are signed with Asian companies and not all the gas contracted to the market’s portfolio aggregators has been re-contracted, Corbeau’s feeling is that more should come, particularly given that 15bn m³/yr is roughly the increase in overall US LNG forecast by the EIA this year—i.e., the EU has been promised only new LNG, not diversions of existing trade.
“The US can easily exceed this 15bn m³/yr target, as European price signals on the TTF are likely to far exceed Asian spot prices,” agrees consultancy Rystad Energy. And US project developers look keen to prove this prediction correct, with a stream not just of positive statements, but also concrete steps to boost US volumes, including first exports from a new liquefaction plant and a new project aiming to export gas as soon as next winter.
But it is not all rosy for Europe. For one thing, much of the rest of the progress is on future developments, not existing or close-to-completion plants that could deliver additional gas in the short term.
Two deals have also been signed, not by Europe’s hard-pressed utilities but by Chinese offtakers. And the first cargo from the startup was lifted by a Japanese trading heavyweight which, although having a significant European footprint, also serves a substantial East Asia end-user demand portfolio.
US developers Cheniere Energy and Venture Global LNG have been particularly busy. The former announced on the very day that Russia invaded Ukraine that it had amended a 2019 long-term gas supply agreement with US producer EOG Resources for its Corpus Christi Stage 3 project.
EOG will sell 420,000mn Btu/d of gas to Cheniere for 15 years, split evenly between the first, fourth and fifth trains of the Stage 3 project. Cheniere will market c.2.55mn t/yr of LNG from liquefying this gas, while EOG will receive a price linked to the Asian JKM benchmark—another reminder that not all US LNG may end up in Europe.
A previous gas supply agreement for EOG to sell 300,000mn Btu/d to Cheniere at a price indexed to Henry Hub has been extended to also span 15 years. EOG will therefore supply a total of 720,000mn Btu/d to the Corpus Christi Stage 3 project.
It is being developed to include seven midscale liquefaction trains, each of c.1.49mn t/yr, with a total expected production capacity of over 10mn t/yr. Cheniere aims to reach FID on Stage 3 this summer. In early March, it entered into an engineering, procurement and construction (EPC) contract for the project with engineering heavyweight Bechtel.
And just two days later, the US developer agreed with French utility Engie to amend a June 2021 LNG SPA, increasing its volume and extending the term beyond 2040. Under the revised deal, Engie will purchase c.0.9mn t/yr—up from a 0.2-0.6mn t/yr range in the previous contract—from Corpus Christi on a Fob basis for a term of c.20 years, beginning from September 2021. The purchase price is indexed to the US Henry Hub benchmark, plus a fixed liquefaction fee.
At the start of March, Venture Global saw the successful loading and departure of the first LNG cargo from Louisiana’s 10mn t/yr Calcasieu Pass export facility—proclaiming, at just 29 months from FID to production, a global record for the fastest large-scale greenfield liquefaction facility ever built. But the lifter was the trading arm of Japan’s Jera, again emphasising that US LNG serves a global market.
In early March, Venture Global inked a new 20-year SPA with another portfolio player, Shell, for 2mn t/yr from its 20mn t/yr Plaquemines export plant, due onstream in 2024. Shell already has a 2mn t/yr SPA for Calcasieu Pass.
And, later in the month, it sealed two deals with US regasification terminal developer New Fortress Energy (NFE)—for 1mn t/yr from Plaquemines LNG and the same amount from the second phase of Calcasieu Pass. This is the first SPA tied to the latter project, on which the firm expects to start construction in 2023. Venture Global has now executed more than 80pc of long-term 20-year contracts signed by US LNG companies since 2017.
Venture Global has sold 14mn t/yr of Plaquemines’ nameplate 20mn t/yr capacity, with the firm expecting to announce contracts for the remaining capacity “in the coming weeks”. It expects to “soon” take formal FID—having already started construction last summer—and close project financing.
NFE could potentially bring its LNG to the EU, if Ireland decides to end its paradox of supporting gas-fired power generation but opposing the development of new LNG import facilities such as one proposed by NFE. But the firm also has regasification terminals in Jamaica and Puerto Rico, existing and planned facilities in Brazil, and proposals for further import infrastructure in Mexico and Nicaragua, as well as in Sri Lanka. Again, Europe faces global competition for US molecules.
NFE is also hoping not just to buy additional LNG, but to produce it as well. At the end of March, it filed applications with relevant authorities for permits and regulatory approvals to construct a new liquefaction terminal off the coast of Louisiana. It envisages a facility with a capacity of c.145bn ft³/yr, or c.2.8mn t/yr of LNG, targeting startup in the first quarter of 2023.
Also at the end of last month, project developer Tellurian gave the green light to its EPC contractor, Bechtel, to begin construction of phase one of its Driftwood LNG terminal near Lake Charles, Louisiana. “Beginning construction now allows Tellurian to deliver upon our robust schedule for first LNG in 2026 while we complete the project financing,” says Tellurian CEO Octavio Simoes.
Driftwood LNG is a c.27.6mn t/yr liquefaction facility. Phase one will include two plants with an export capacity of up to 11mn t/yr.
Other projects have yet to announce concrete proposals but seized on the joint communique between President Biden and European Commission president Ursula von der Leyen to champion roles for their projects in helping facilitate Europe’s pivot away from Russian gas. “Global developments have created a sense of urgency for new projects like Alaska LNG,” says the Alaska Gasline Development Corp.
But it also admits that its proposed 20mn t/yr project—which aims to liquefy North Slope associated gas currently reinjected into oilfields and will take six years to construct—is primarily targeting Asia. Alaska LNG is expected to deliver volumes for c.$6.70/mn Btu, “below the expected price from Gulf Coast projects targeting the same Asian markets”, the firm tells an Alaskan regional newspaper.
Its logic is that the Alaska project will free up other US exports to go to Europe rather than Asia. “Meeting growing Asian LNG demand with Alaska’s natural gas will enable US Gulf Coast LNG suppliers to focus on serving our European allies,” the firm says.
“Sempra stands with our European allies as they pursue their energy security and sustainability objectives, and we look forward to collaborating with the US administration to expeditiously bring more LNG to market,” says Jeffrey Martin, CEO of US energy infrastructure company Sempra.
The firm operates the three-train, 12mn t/yr Cameron LNG plant in Louisiana and is developing an expansion, on which it signed a heads of agreement with existing customers TotalEnergies and Japanese firms Mitsui and Japan LNG Investment in early April that would give Sempra rights to 50.2pc of the expansion train’s production and 25pc of additional output from Trains 1-3—with the remaining additional capacity proportionately allocated to the current buyers.
In January it asked for the project’s permit to be amended from two new 4.98mn t/yr trains to a single 6.75mn t/yr addition, although the project also aims to increase production capacity from Cameron’s three operating trains through debottlenecking activities.
It is also converting its Costa Azul regasification terminal in Mexico into a liquefaction plant that will have a nameplate capacity of 3.25mn t/yr for its first phase but initial offtake capabilities of a lower 2.5mn t/yr. And at the end of March, it signed an MoU with TotalEnergies on another Mexican project, the midscale west coast Vista Pacifico facility in which the French major will take at least a 16.6pc stake and commit to a third of its offtake.
In the US, Sempra has also proposed to regulator Ferc a two-train facility of up to 13.2mn t/yr at Port Arthur in southeast Texas.
Glenfarne “is stepping up its commitment by accelerating efforts to deliver responsibly sourced, environmentally sensible US LNG to commercial partners in Europe”, the industrial conglomerate said in mid-March. “I am grateful to be part of the solution helping the European continent achieve energy independence for decades to come by facilitating long-term deliveries of responsibly sourced US LNG,” adds Vlad Bluzer, managing director of the firm’s Magnolia LNG and Texas LNG liquefaction projects and himself a Ukrainian.
But the last week of March also saw two US exporters sign deals with Chinese customers, in yet another reminder of the global competition for molecules Europe faces. US midstreamer Energy Transfer LP inked two 20-year SPAs—for 1.8mn t/yr and 0.9mn t/yr on a Fob basis linked to Henry Hub plus fixed liquefaction—with two subsidiaries of privately-held Chinese firm ENN. First deliveries are expected to commence as early as 2026.
“We are experiencing strong demand for long-term offtake contracts for Lake Charles LNG, and we are optimistic that we will be in a position to take a positive FID by year-end,” says Tom Mason, president of Lake Charles LNG. The 16.45mn t/yr project is another brownfield conversion of a former regasification plant.
The larger contract is with ENN’s downstream arm, which has LNG distribution capacity of over 10bn m³/yr and runs the Zhoushan LNG regasification facility, China’s first large-scale private terminal. Its total gas sales volume in 2021 was 37.2bn m³.
Heads of agreement
And Next Decade has executed a binding heads of agreement with China’s Guangdong Energy for a 20-year Henry Hub-linked deal of up to 1.5mn t/yr from the firm’s Rio Grande liquefaction plant in Brownsville, Texas. Supply will initially be from train one of the project, expected to start commercial operations in 2026. The two parties aim to firm the agreement into an SPA in this year’s second quarter.
“Guangdong Energy is one of the largest power generation enterprises in Guangdong and we are pleased they have entrusted us to supply their rapidly growing business,” says Next Decade CEO Matt Schatzman.
Assuming the achievement of further LNG contracting and financing, Next Decade anticipates taking FID on a minimum of two trains at Rio Grande—which has a target maximum capacity of 27mn t/yr—in the second half of 2022.