U.S. LNG: Top Producers Prop Up Europe

U.S. has been ramping up its production of Liquified Natural Gas (LNG), supplying an energy starved U.K. and Europe.

U.S. exports of LNG have been instrumental in supporting Europe’s energy crisis. The increased demand from the Russian / Ukraine conflict and their increased export capacity has made the U.S. the world’s largest exporter of LNG in the first half of the year. LNG exports increased by 12% averaging 11.2 billion cubic feet per day (Bcf/d).

Most U.S. LNG exports went to the EU and the UK during the first five months of this year, at about 64% (7.3 Bcf/d) of the total U.S. LNG exports. The U.S sent the most LNG to the EU, providing 47% of Europe’s total LNG imports followed by Qatar at 15%, Russia at 14% and four African combined at 17%.

Europe has been spending up to $600 billion in subsidies to support its citizens.
LNG supply will be tight for years, according to producers in the industry due to supply lagging behind strong and growing demand in Europe and other markets. Global Energy demand will probably not peak for another 30 years. At a recent energy conference, Meg O’Neil CEO of Woodside Energy Ltd. Said that substantial new production is required in the short term and will not come online until 2026.

Fatih Birol, the head of the International Energy Agency, has said gas supplies will be squeezed next year as China emerges from COVID-zero lockdowns and competes to purchase available gas. Analysts are suggesting that European governments and investor pour capital into US LNG producers. This would imply long term contracts for LNG, which Europeans have been reluctant to sign.

Shipping rates for LNG are increasing dramatically, as the world reels from the effects of inflation. Dutch TTF futures, Europe’s natural gas benchmark, were up 0.8% at 163 euros ($161) per megawatt hour on the ICE index on Wednesday.

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