LNG production in the US is growing following world gas prices

MOSCOW, 29 Aug – PRIME. The production of liquefied natural gas (LNG) in the United States is gaining momentum following the rise in the cost of “blue fuel” in world markets, according to the international analytical agency S&P Global Platts.

“Record global gas prices, which trade at up to $100 per MMBtu on land European markets, are pushing U.S. LNG export terminals to ramp up production, pushing demand for this week’s initial reached its highest level since early July.

GROWTH IN LNG PRODUCTION

Thus, on August 25, demand for gas from US export terminals exceeded 11.5 billion cubic feet per day (about 325 million cubic meters), which was the highest level since July 1.

This summer, all US LNG export projects are aiming to maximize their capacity. But the main reason for the increase in the indicator was the increase in production at the Calcasieu Pass project of Venture Global. It went online in January 2022 and will eventually be able to produce 10 million tons of LNG per year. Demand for gas from this enterprise on August 26 reached a record 1.6 billion cubic feet per day.

At the same time, the capacity of the Freeport LNG plant, which is estimated at about 2 billion cubic feet per day, or about 15% of the total US export potential, has been retired since June 8 due to the accident. The project operator said earlier in August that a partial resumption of production at this plant is expected no earlier than early November.

PROFIT

Platts notes that US manufacturers have every reason to ramp up production. Prices on world markets are as attractive as possible and allow them and traders to make big profits. Prices for spot LNG supplies in northwestern Europe reached a record $74.49 per MMBtu ($2,660 per thousand cubic meters) on August 26, and $71 per MMBtu ($2,536 per thousand cubic meters) in Asia on August 25.

At the same time, in the US spot market, the cost of gas at the main American hub, Henry Hub, is $9.29 per MMBtu ($332 per thousand cubic meters). It is generally accepted that the traditional formula in long-term contracts for the purchase of LNG from the US project is 115% of the Henry Hub price plus a liquefaction fee of $3-4 per MMBtu, for a total of $13.7-14.7 (490- $525 per thousand cubic meters).

At the same time, according to Platts, on August 26, the price of spot LNG shipments on FOB terms in the Gulf of Mexico was $73.35 per MMBtu ($2,620 per thousand cubic meters). It follows that traders who have long-term lease contracts for liquefied natural gas production facilities in the United States can make a profit of 2,000 per thousand cubic meters, provided that the goods are sold from the export terminal.