By - Jim Vess

U.S. becomes third biggest LNG exporter as Europe becomes a more important market

Energize Weekly, August 7, 2019

U.S exports of liquefied natural gas (LNG), which have been steadily rising, hit 4.7 billion cubic feet a day in May 2019, as exporters added a growing European market to their Asian base.

In 2019, the U.S. became the third largest LNG exporter in the world behind Australia and Qatar, averaging 4.2 billion cubic feet a day in the first five month of the year, according to the federal Energy Information Administration (EIA).

The U.S. moved past Malaysia among exporters. Malaysia produced an average of 3.6 billion cubic feet of LNG a day for the first five months of the year.

The EIA analysis uses data from the U.S. Department of Energy’s Office of Fossil Energy.

The expansion of U.S. exports has been bolstered by the addition in November 2018 of four new liquefaction units in Louisiana and Texas, with a combined capacity of 2.4 billion cubic feet a day.

While Asia accounts for the largest share of U.S. exports, the European market has grown significantly and now account for 40 percent of U.S. exports.

Overall, LNG exports to Europe during the winter of 2018-2019 were 60 percent higher, 10.2 billion cubic feet a day, than they were for the two previous winters. In January, exports to Europe surpassed those to Asian for the first time.

“A warm winter in Asia and declining price differentials between European and Asian spot natural gas prices led to increased volumes of U.S. LNG exports delivered to Europe,” the EIA said.

The round-trip transport costs from the Gulf of Mexico to Europe is about $1.50 per million British thermal units less than the cost to Asian markets. If the spread between what Asian and European markets will pay for gas is small, this could make Europe “the preferred destination,” according to the agency.

The spread between spot prices in Japan and Europe were only $1 in December 2018 and 60 cents in April 2019.

Exports to Europe are also expected to grow as those countries increase natural gas consumption as part of initiatives to cut greenhouse gas emissions.

Meanwhile total imports to the three largest LNG markets – Japan, China, South Korea – began to decrease in February as a result of a milder-than-normal winter, the restarting of nuclear power units in Japan and Chinese tariffs.

China, which has become the world’s second largest LNG importer behind Japan, is projected to continue to increase LNG imports spurred by the country’s polices aimed at switching from coal to gas.

In the first five months of 2018, China accounted for 7 percent of U.S. LNG exports. In September 2018 in retaliation to tariffs imposed on Chinese goods by the Trump administration, China added a 10 percent tariff on U.S. LNG imports. Since then, U.S. exports have made up 1 percent of the Chinese market.

EIA said that U.S. LNG exports will continue to grow as two new liquefaction facilities, one in Texas and one in Georgia, are set to come online in 2019.

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