By 2028, LNG capacity in the US, Mexico and Canada is expected to double. However, the US Department of Energy does not foresee a corresponding increase in production. Experts believe that the country may face an increase in domestic prices, which will not please either domestic consumers or LNG importers from other countries, from whom the United States expects tens of billions of additional dollars.
There are plans to launch or expand 10 LNG terminals in the US, Canada and Mexico over the next four years. According to the US Department of Energy Information Administration, North America’s liquefied gas export capacity will more than double to 676 million cubic meters per day. In the United States itself, the capacity of LNG plants will almost double: from 324 million cubic meters per day (118 billion cubic meters per year) to 584 million (213 billion cubic meters per year).
Many people have large volumes of additional LNG. For example, the United States’ allies in Europe. The European Union promises to abandon Russian gas by 2027. In addition, developing countries in Asia plan to increase the participation of blue fuel in the fight against climate change. According to Wood Mackenzie, this year alone, future consumers have contracted 56 million tons (77 billion cubic meters per year) of non-existent LNG capacity in the United States.
However, things may not turn out exactly the way everyone would like. On the one hand, the deadlines for the start-up of new LNG plants in the United States are changing and it was planned to reach the declared volumes almost a year earlier. On the other hand, a significant expansion of LNG exports could harm the United States itself. Not in vain, the Industrial Energy Consumers of America (IECA) association, which brings together 4.2 thousand companies, has been demanding for several years that the authorities reduce even current LNG exports.
Currently, LNG shipments from the United States abroad absorb only 10% of the gas produced in the country. Nearly doubling growth, including Mexico, whose LNG projects will also receive US gas, would increase the export share to more than 18% at current production.
There are still gas reserves in the United States. The United States Department of Energy estimates proven reserves at 19.7 trillion cubic meters (17 years of current production). And U.S. companies plan to increase production, but the U.S. Department of Energy’s forecasts fall short of export growth. If overseas supply can increase by 280 to 300 million cubic meters per day until 2028, then gas production in the country will increase, according to the EIA, by 180 to 200 million cubic meters until 2030.
Chief strategist of the investment company “Vector X” Maxim Judalov He notes that fuel production in the United States is also growing thanks to associated gas, the volume of which depends on oil production, and there are practically no direct investments in gas production. But the latest EIA forecasts suggest that US oil production has already plateaued and will not change for decades.
Production growth is only one side of the problem. The consulting firm Enverus Intelligence Research published a report according to which the United States is already running out of gas pipelines. Especially in the Permian Basin, which is the resource base for LNG projects on the Gulf Coast. Of the four pipelines needed, three have received regulatory approval, but there is no final investment decision yet, Enverus Intelligence Research added.
In many ways, American exports depend on domestic consumption. The US Department of Energy does not predict growth, but only in the event that the increase in electricity demand is supplied by green power plants and the proportion of gas generation remains around 40%.
“If gas demand grows, competition may arise between domestic industrial consumers and LNG plants, driving up prices in the market.” — says the deputy director of the National Energy Security Fund (NESF) Alexey Grivach.
Many new projects prefer to enter into long-term contracts with potential suppliers, he notes: “Large consumers of gas distribution companies can probably start using this practice. In this case, those who will not have long-term contracts and the likely importers in Canada and Mexico will take the first hit in the event of a shortage. “Therefore, US authorities could well limit pipeline exports to their neighbors.”
Meanwhile, the US Department of Energy is already predicting an increase in average wholesale gas prices in the United States: from $71 per thousand cubic meters in August to around $110 next year. Deloitte expects a gradual increase in quotes to $230 by 2041.
This price level was observed in the United States at the height of the energy crisis in 2022 and is not necessary for either the local industry or importers. At this price, the cost of LNG according to the traditional formula with delivery to Europe will be 400 dollars per thousand cubic meters, which corresponds to current prices in the EU, which are already double what they were before the crisis.
It is not surprising that the former president of the European Central Bank Mario Draghi pointed out in a plan to stop the EU’s economic slowdown that at the center of Europe’s economic problems is the cost of energy for industry, which is currently forced to pay 158% more for electricity and 345% more for electricity. more for natural gas than in the United States. .
