As a result, US LNG exporters signed a wave of long-term deals with foreign buyers. The LNG industry also continues to build additional export capacity along the US Gulf Coast, although new terminals and expansions are unlikely to be completed until 2024. Gulfstream LNG, a Houston company, announced this week that it plans to build a 4-million-ton tank LNG facility in Plaquemines Parish.
LNG industry insiders expect demand for US LNG to be relatively strong in 2023, although this largely depends on continued interest from Europe.
Any continued demand will depend on whether buyers in Asia or Europe are willing to sign long-term contracts for LNG, said Greg Upton, interim executive director of LSU’s Center for Energy Studies. These long-term contracts reduce risk for exporters and give them more flexibility when seeking project finance.
“When we see these projects moving forward, that tells you there are willing buyers,” Upton said.
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Demand will also depend on the price differential between US natural gas and European or Asian natural gas.
Futures on Henry Hub, the US benchmark for natural gas, traded at $2.38 per million British thermal units on Thursday, according to global markets firm CME Group, a global markets firm.
Dutch TTF, the European standard, was trading at $15.78 per MMBtu. JKM, the Asian benchmark, traded at $14.84.
“How this economy works is pretty simple,” Upton said. “There are some costs associated with transporting this gas, and if the price differential between the United States, Henry Hub and TTF and JKM is large enough to create that arbitrage, then the companies will do so. That’s exactly what we’re seeing right now.”