In February, Energy Intelligence reported strong interest in long-term LNG projects, even as the Biden administration paused new licenses for planned LNG export projects. The Department of Energy cited concerns that exporting large amounts of U.S. gas could harm America’s competitive edge in cheap energy, vital for industries like steelmaking and petrochemicals. Additionally, the pause aims to address environmental activists’ worries about the high carbon footprint associated with the LNG production and consumption cycle.
As 2024 progresses, new data confirms Energy Intelligence’s findings. A recent report from Wood Mackenzie reveals that 58 million tons per year (tpy) of U.S. LNG sales agreements and contracts were signed in the first nine months of 2024. This is notable compared to 94 million tpy for all of 2023, especially given the challenging circumstances. Recently, LNG contracting has resumed following a ruling from U.S. District Judge James Cain, who deemed the Biden administration’s pause “completely without reason.” The judge ruled that the freeze likely violated the Natural Gas Act of 1938.
The Wood Mackenzie report highlights several key trends. Contracting by traditional buyers reached 38 million tpy in long-term deals, only 12 million tpy short of last year’s record. Larger deals are making a comeback, with 60% of contracts signed this year exceeding 2 million tpy. Despite the licensing pause, total contracting volumes from U.S. projects decreased, with 18.9 million tpy of new agreements made in the first eight months of 2024. Notable contracts include Rio Grande LNG’s deal with ADNOC for 1.9 million tpy and Aramco’s agreement for 1.2 million tpy. Texas LNG has also made strides, securing agreements for 3 million tpy with EQT Corp. as it seeks financing for its project.
In April 2024, Cedar LNG signed a second 20-year capacity deal for 1.5 million tpy with Pembina Pipeline Corp., following a similar agreement with ARC Resources in 2023. Woodfibre LNG has completed its third deal with BP, ensuring full booking, while Mexico Pacific in Texas has finished marketing for its first three trains.
Overall, Wood Mackenzie anticipates continued high contracting activity, a positive sign for the U.S. LNG sector as further North American LNG agreements are essential for project progression.
Middle East LNG Sellers Gain Market Share
Meanwhile, Middle Eastern LNG suppliers are capitalizing on the U.S. project pause to increase their market share. QatarEnergy has signed a 20-year LNG deal with India’s Petronet, providing 7.5 million tonnes per annum (mtpa) of LNG. Indian buyers are returning to the long-term market, encouraged by low gas prices. Wood Mackenzie notes that some sellers are offering competitive prices linked to oil, attracting price-sensitive buyers.
Typically, LNG prices are linked to Brent crude oil prices. For instance, a 12% slope based on Brent’s price of $73.23 per barrel would result in an LNG price of approximately $8.79 per mmBtu.
Other Middle Eastern suppliers are also active. Oman LNG has formalized agreements with Shell, while Jera, SEFE, and BOTAS have transitioned their arrangements into sales contracts. ADNOC has announced 15-year agreements totaling 3.4 million tpy with European and Asian buyers from its Ruwais projects, alongside additional agreements for 1.6 million tpy with portfolio players. These contracts have given ADNOC the confidence to proceed with a Final Investment Decision (FID) for the project in June 2024.
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