Rising costs of building and equipping new U.S. liquefied natural gas plants will reduce the competitiveness of U.S. gas exports, LNG analysts at Poten & Partners predicted on Tuesday.
U.S projects have faced rising construction costs, with Venture Global’s Plaquemines export plant under construction in Louisiana over budget by $2.3 billion, and Golden Pass LNG, a joint venture between Exxon Mobil and QatarEnergy, more than $2 billion over its original budget.
Natural gas prices could also go to as high as $6 a million standard cubic feet because of increased demand from LNG export plants, a possible 20% growth in electricity usage and the need for significant investment in infrastructure, said Jason Feer, Poten and Partners’ business intelligence chief.
“We’ve got a lot of gas in the U.S., but we don’t really have vast amounts of really cheap gas,” Feer said.
The Biden administration’s export permitting pause likely will keep global LNG prices higher for longer and benefit existing exporters, Feer said at Poten’s Global LNG Outlook conference.
Feer added that for the firms proposing new export plants along the U.S. Gulf Coast, landing new customers will present a greater risk than regulation, and that even if the incoming Trump administration removed all the regulations, finding customers will still be a challenge.
Among other risks facing LNG exporters is political pressure in China limiting its switch away from coal, potentially lifting its LNG demand by 5% over the next decade. Europe is highly likely to resume buying Russian gas if there is peace in Ukraine, Feer said.
“There is this idea that China will switch from coal to gas. We think that is very unlikely… that will make China dependent on the U.S. or Qatar, that’s expensive and a potential risk to their national security, so I don’t see that happening,” Feer said.
In the near term, Brent oil-linked LNG prices are trending lower and could decline further. Feer said $12 per million British thermal units is the new average global price for LNG and that should continue for the next decade.
(Reporting by Curtis Williams; writing by Gary McWilliams; editing by Jonathan Oatis and Jan Harvey)