U.S. liquefied natural gas plants could take on as much as 40 billion cubic feet of natural gas per day in coming years, Cheniere Energy Chief Commercial Officer Anatol Feygin said on Friday. U.S. plants are currently using a record 18 bcfd of natural gas to produce LNG, according to data from financial firm LSEG.
The increased demand for liquefaction could lead to natural gas prices, which have risen around 62% over the past year, becoming even more expensive toward the end of the decade, Feygin said at a seminar held by the Federal Reserve Bank of Kansas City.
“You kind of saw that in 22/23 coming out of COVID. LNG went back up to full utilization and then grew, so Nymex had an incursion into the high single digits. Very quickly supply responded,” Feygin said, suggesting that natural gas drillers would be able to increase output to match the increased demand. While there are fears about an oversupplied market as new LNG capacity comes online, the executive said that Asian countries such as Bangladesh and Pakistan could be attracted by lower prices and end up increasing demand.
The world will need to add 30 million metric tons of LNG every year to meet global demand growth, with most of the new capacity coming from the U.S., Feygin said. Rising construction costs have driven some of the recent final investment decisions in U.S. LNG, he said.
“Over two-thirds of the FID this year was done because the fixed-priced EPC contracts were about to expire and there was a rush to maintain the construction cost of building the LNG plant,” Feygin said. The U.S. LNG sector could eventually produce as much as 300 mtpa, Feygin said, acknowledging that the sharp growth could challenge some producers if they’re not prepared to weather periods of lower prices.
Only 17% of the new capacity to come from plants that reached FID this year has been sold under long-term contracts, and many portfolio players are unprepared, he warned.
(Reporting by Curtis Williams in Houston; Editing by Leslie Adler, Nathan Crooks and Edmund Klmaann)