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U.S. LNG capacity to jump 20% as Europe shifts away from Russia

  • February 19, 2022
  • , Nikkei Asia , 3:03 p.m.
  • English Press

HOUSTON, U.S. — The U.S. will see its production capacity for liquefied natural gas surge 20% by the end of the year, becoming the world’s top exporter of the fuel, helped by Europe’s efforts to wean itself off Russian supplies.


Investments in new U.S. LNG facilities have risen for the first time in three years, lifting total capacity to 100 million tons this year. A new LNG plant on the Gulf Coast in Louisiana state will add a maximum capacity of 11 million tons.


The new Calcasieu Pass LNG plant has begun production, its operator said this month. An LNG tanker from the Japanese fuel procurement enterprise JERA has already arrived at the port to prepare for LNG transfer.


JERA is a 50-50 joint venture formed by Tokyo Electric Power Co. Holdings and Chubu Electric Power. The fuel’s destination has yet to be finalized, but it could head to Europe if prices are higher there than in Asia. The plant’s total capacity accounts for about 15% of Japan’s LNG imports.


In January, the U.S. exported about 4.3 million tons of LNG to Europe, according to market data provider Kpler, accounting for roughly 60% of total exports. The ratio is up from about 10% a year earlier.


About a third of the gas consumed in Europe originates from Russia. But January’s exports to the European Union by Russia’s state-owned energy major Gazprom fell 40% from a year earlier to 5.8 million tons.


By just looking at January’s numbers, U.S. gas exports can cover between 70-80% of Russian deliveries to Europe. But when using 2020 as the baseline, the year before Russia tightened supplies, U.S. gas exports to Europe would equate to roughly 40% of Russian supplies to Europe if volumes are maintained at January’s level.


The combined capacity of plants in the U.S. that are in the designing or construction stages this year total north of 30 million tons, an 8-year high, according to research firm Rystad Energy.


Recent monthly output of natural gas is approaching record highs logged in the latter half of 2019.


LNG facilities take three to four years to construct, however. That would mean this year’s plant investments would not reach delivery stage until 2025 or later. But were European-bound exports to climb, the continent would be able to mitigate the risk posed by Russia.


Globally, demand for LNG will grow by 20 million tons this year to 400 million tons, according to the Japan Oil, Gas and Metals National Corp., a government-backed institution. This growth will be driven by Asian consumption.


Global excess supply capacity stood at nearly 3 million tons in January 2021. If demand climbs at 3% a year, then the redundancy is expected to shrink to below 700,000 tons in January 2025.


If the expansion of supply capacity does not keep up with demand, gas inventories could diminish, like they did in Europe this winter. This would set the stage for a worldwide scramble for LNG.

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