Soaring costs, competition for buyers hampers US LNG boom - FT

Quantum Commodity Intelligence – Competition for customers between developers and escalating costs are hampering efforts to ramp up LNG projects in the US, despite the gap left by sanctions on Russian natural gas into Europe, according to an article published by the Financial Times Monday.

While a number of projects, together worth $40bn, have reached the crucial "final investment decision" milestone since Russia's invasion of Ukraine, other new builds have faced prolonged delays, amid spiralling costs and competition to secure the long-term purchase agreements needed to underwrite projects.

Global LNG prices have also shown big retreats from last summer's peaks, although the need to boost exports has been highlighted as US domestic natural gas prices slumped to fresh two-year lows this month -- even turning negative for some production from the Permian Basin.  

Asian LNG Japan/Korea Marker prices in April have fallen to around $12.50/mmBtu, down from over $75/mmBtu last August, while US natural gas basis Henry Hub have shrunk to just above $2/mmBtu.

The FT report noted that Tellurian has struggled to finance the $25bn Driftwood development, while Energy Transfer's Lake Charles conversion and Next Decade's Rio Grande terminals have both been delayed until later in the year.  

"It's dramatically more expensive [to build projects]. There are fewer and fewer construction companies that can actually handle these kinds of loads. But you have to confront . . . your supply chain issues and all the cost inflation," said Tellurian's Charif Souki, who pioneered the development of the US LNG export industry more than a decade ago.

Planned projects under construction or entering service were set to boost US capacity by around 70% by 2027, leapfrogging Australia and Qatar as the world's largest LNG exporter. capacity.

However, the report said analysts expect a number of these planned developments to fail due to the investment climate, particularly around long-term fossil fuel projects in a decarbonising world.

But several projects are set to go ahead, however, including Sempra's 13.5mn tonnes a year plant in Port Arthur plant in south-east Texas, while Venture Global is moving forward with the second phase of its 20mn tonnes/y Plaquemines plant in Louisiana. Last year Cheniere was greenlighted for a 10mn tonnes/y expansion of its facility at Corpus Christi terminal in Texas.

Meanwhile, the Biden administration has approved exports from the Alaska Gasline Development Corp's Alaska LNG project.

Reuters reported that the $39 billion project could be operational by 2030, exporting LNG primarily to countries in Asia, although is still subject to further approvals.