The US is poised to meet growing demand for LNG in coming years, despite an anticipated near doubling of demand from China as that country works to lower greenhouse gas emissions, an official with America’s largest LNG exporter said Tuesday.
The three main pillars of demand—China, Southeast Asia, and Northeast Asia—will each require more than 100-million tonnes/year (tpy) of LNG through 2040, said Anatol Feygin, Cheniere Energy’s executive vice-president and chief commercial officer, at an online discussion hosted by the Center for Strategic and International Studies Energy Security and Climate Change program.
China could see stronger and quicker LNG demand growth, with imports rising to 130-140 million tpy in the mid-2030s to 2040 timeframe from today’s 70 million tonnes, Feygin noted. Beijing has pledged to peak carbon emissions before 2030 and to reach carbon neutrality by 2060.
China, already the world’s leading LNG purchaser, can only reach those goals through use of natural gas in the short- to medium term, Feygin said, noting that CO2 emissions from natural gas are about half that of coal, the country’s primary energy source.
US LNG exporters are in a “good place” to meet growing demand as the country embarks on its “third wave of LNG supplies,” doubling export capacity by 2026, he said. Last year, the US became the largest exporter of natural gas, overtaking Qatar and Australia.
The LNG market is in “a calmer period” after a tremulous couple of years when demand and prices surged after Russia reduced piped-gas supplies before and since its invasion of Ukraine, Feygin said. “In Europe and parts of Asia, inventories are in good shape,” he said, and the market has handled “quite well” a few bouts of cold weather in Northeast China and Europe.
“It’s been quite a challenging period for the industry, but one that proved the mettle of LNG as a flexible fuel, as a product that can respond to market conditions and, in many cases, help countries and regions adjust to an unprecedented challenge,” Feygin said.
Still, the LNG market is finely balanced, which could lead to price spikes and a lack of excess supply to feed markets without long-term contracts to take supply. “Nothing we see could possibly compare to the shock to the system that was the Ukraine war,” Feygin said. “But non-OECD markets [that saw lower supply availability as European demand surged to replace Russian gas] continue to be relatively starved for product.” Any event—even a “single-digit percentage” supply curtailment or demand increase—could throw the market back into a precarious position.”
There remains concern that LNG export increases in coming years from the US, Qatar, and other countries could result in an oversupplied market, he said. “The good news over the past few years is that the market learned that when there is a dramatic, unprecedented [price] drop in the market, particularly the US, can take supplies—rather economically—off the market and return them within months.”
Feygin added that it is “healthy to have some amount of flexibility in the market,” noting that “the US industry tends to run at 83-84% utilization” and projects “tend to come in a little later than expected.”
Cheniere and other LNG exporters recognize that environmental activists oppose LNG exports because it could entrench natural gas—a fossil fuel—in the long term, he said. But the industry will move to lower the life-cycle methane emissions of LNG in the coming years, Feygin predicted.
“One of the problems is that nobody knows for sure the actual [life-cycle] methane emissions of the industry,” Feygin said, adding that “there are plenty of estimates.”
For its part, Cheniere in 2018 unveiled a methane tracking initiative to quantify, monitor, report, and verify (QMRV) emissions. For the past 1.5 years, the company has included tags that list the emissions profile of each of its cargos.
He believes other LNG suppliers will do the same, and that all segments of the industry, including producers and the midstream sector, are committed to transparency. “We recognize that doing QMRV right is going to take time, but it is critical going forward” to ensure that US Gulf Coast LNG products are on the market “for decades and decades” to come, Feygin said.