CERAWeek: US LNG anchors global gas security, spot-price risks reshape contracting

US liquefied natural gas remains the cornerstone of global energy security as geopolitical disruptions continue to expose vulnerabilities in gas supply chains, particularly for markets reliant on spot pricing, executives from Freeport LNG and Excelerate Energy said.

Speaking at CERAWeek by S&P Global on Mar. 25, Michael Smith, chairman, chief executive officer, founder, Freeport LNG, said US gas exports have become essential to Europe since the disruption of Russian pipeline supplies.

“Without 20 bcf a day of US natural gas…Europe would be in a standstill already,” Smith said, noting that US LNG has played a stabilizing role for both European economies and global gas markets.

Spot-market exposure

Smith said the ongoing volatility seen in global prices is primarily a function of spot-market exposure. Customers with long-term US LNG contracts linked to Henry Hub pricing remain insulated from price swings, he said, while spot buyers face the bulk of the risk during periods of disruption.

“The customers who have signed up for long-term contracts for US LNG are not facing any volatility. Freeport is delivering every-other-day cargoes that go to mostly Europe and to Asia. They're getting the same price that they bargained for 10 years ago…So, we are the answer to volatility,” Smith said.

That lesson has resonated beyond Europe, said Steven Kobos, president and chief executive officer of Excelerate Energy. Kobos said events since 2022 have reshaped supply strategies across Asia and the Global South.

“If you're in the South, don't be too dependent upon spot. You need to contract on a long-term basis, because if there is a disruption…Europe will take your molecules,” he said, adding that governments are increasingly focused on long-term contracting and supply diversification.

Looking ahead, Kobos said the next phase of LNG market growth is tied to investments downstream more than liquefaction capacity, specifically regasification infrastructure and floating solutions that enable faster market entry.

Pointing to “two wars in 4 years,” Kobos said, “energy security is critical…and LNG is going to be a critical component of that energy security.”

“Regasification is going to be necessary…for a 50% increase in a global commodity in 5 years,” he said.