The start of North American LNG exports is coming closer as the US picks up speed in approving projects, experts to gather and share insights on the dynamics and export capacity of US LNG exports to Asia.
The US Department of Energy (DoE) has now approved a fourth LNG export facility at Cove Point following the Lake Charles export facility approval five weeks ago. These projects coupled with the news that Freeport LNG has entered a fourth Liquefaction Tolling Agreement (LTA) on its third train with Toshiba Corp., have left Asian buyers waiting with bated breath.
Asian gas prices have been traditionally linked to oil indexation, and with impending exports from North America, many buyers are hoping for a shift in the pricing paradigm and a fairer pricing mechanism not unlike the Henry Hub.
“[Asian] buyers find Henry Hub indexed LNG especially attractive, not only because the current outlook for the Henry Hub price results in lower delivered costs, but also because of the benefits that diversification brings in reducing their portfolio volatility.” Cheniere Energy’s, Vice President for LNG Trading, Nicolas Zanen said in a recent insight interview on US exports and pricing paradigms.
“Over the last two years, Asian buyers have been very active in securing Henry Hub pricing. For instance, Cheniere entered into long term LNG contracts indexed to Henry Hub with Asian buyers for 7mpta from a total of about 20mtpa sold from the Sabine Pass LNG plant.”
Of all US LNG capacity already contracted for exports, almost half its exports are contracted with Asian buyers, representing more than 25 million tonnes per annum (mtpa) or about 1/6 of the volume currently imported in Asia.
Even though other exporters such as East Africa and Canada also show significant potential in supplying gas to Asia, Mr Zanen believes that they will not pose a threat to US gas exports.
He explains that these countries follow a more traditional LNG project model, as opposed to the US model where the market invests to produce the gas. This means that the US will be able to offer Henry Hub price indexation, extending the liquidity and flexibility of the US gas market into the global LNG business.
Mr Zanen will address the emergence of US LNG exports and the impact it will have on the global gas market liquidity in his presentation at the 2nd Annual Gas Asia Summit (GAS) in Singapore from 30th October to 1st November.
Other key industry experts who will join Mr Zanen in a session titled “North American LNG: Assessing the Dynamics and Export Capacity of United States LNG to Asia” include Dr Mitchell Baer, Director, Office of Policy and International Affairs, The United States Department of Energy, Silvia Marucci, Senior Specialist, Liquid Bulk Segment – Office of Market Research & Analysis, Panama Canal Authority and Peter Hansen, Chief Executive Officer, Oregon LNG.