Opinion

In the Global LNG Market, Time and Tide Wait for No Nation

The saying “time and tide wait for no man” has been around for at least eight centuries and is often attributed to St. Marher who, in 1225, said: “And te tide and te time pat tu iboren were, schal beon iblescet.” (Translation: “And the time and season that you were born shall be blessed.”)

A slight variant of that ancient expression is — in my view — applicable to the global liquefied natural gas market in 2019: “Time and tide wait for no nation.”

This is true because the United States is in the midst of a fierce international competition to build the next wave of natural gas liquefaction projects to meet growing global demand for this clean, versatile and affordable fuel.

Who are our LNG competitors? Primarily Russia and Qatar, but other nations are “in the scrum” as well, most notably Mozambique, Canada, Nigeria, Papua New Guinea and Australia.

Russian rivalry for U.S. LNG takes two forms. The first is Gazprom, the Kremlin-controlled exporter that supplied 36.7 percent of Europe’s natural gas by pipeline in 2018. The second is Novatek, the upstart LNG producer that is building massive liquefaction facilities in the Yamalo-Nenets region of western Siberia.

Novatek is a fierce competitor with colossal ambitions. The company now has three liquefaction units (“trains” in industry parlance) in operation, producing 16.5 million metric tons per annum. This $27 billion facility was brought online ahead of schedule and under budget, a remarkable feat in harsh Arctic conditions. But, even more impressive is the fact that Novatek plans to add 40 mtpa of new LNG capacity by 2030.

America’s other primary competitor for future LNG market share is Qatar. The exporter there is Qatar Petroleum, the national oil and gas firm that has built vast LNG export facilities in partnership with international oil companies — including ExxonMobil, Shell, Total and ConocoPhillips. Of course, QP is also a major U.S. LNG player with its 70 percent stake in the Golden Pass project in Texas, which just started construction and will be operational by 2025. (The remaining 30 percent of Golden Pass is owned by ExxonMobil.)

Currently the world’s largest LNG producer with more than 77 mtpa of capacity, Qatar is enlarging its facilities to 110 mtpa with the first new train coming online in 2024. To grasp the magnitude of this expansion, one only need to read the news release from April 22, wherein Saad Sherida al-Kaabi, QP’s president and chief executive (and Qatar’s Minister of State for Energy Affairs), stated that QP will need more than 100 new large LNG carriers over the next decade.

Beyond Russia and Qatar, additional LNG projects are also under active development in many other nations, and massive new gas discoveries in places such as Mozambique and the Eastern Mediterranean could soon be fueling global LNG supply, as well.

So, where does this leave the United States and the two dozen LNG export projects being proposed in the U.S. Gulf of Mexico and other coastal regions?

Well, to quote St. Marher: “The time and season you were born shall be blessed.” But, the next wave of U.S. LNG export projects born in this season will be blessed only if our federal and state decision-makers understand the hard and unyielding truth that “time and tide wait for no nation.”

If America is to reap the estimated 15.5 million job years and $3.3 trillion in economic benefits that could ensue by tripling U.S. LNG export levels (from 75 mtpa in 2021 to 225 mtpa by 2035), then regulatory permits must continue to be promptly granted, and all other relevant federal or state decisions ought to be viewed through the lens of “will this help or hurt U.S. LNG exports?”

In that regard, we have urged the Trump administration to continue its vigorous promotion of U.S. LNG exports, to restart the U.S.-China trade negotiations (so that new long-term LNG supply contracts with Chinese offtakers might move forward), to cancel the remaining Section 232 steel tariffs (which raise U.S. LNG project costs by hundreds of millions of dollars), and to utilize the financial resources of the new U.S. International Development Finance Corp. and the Export-Import Bank of the United States to support U.S. LNG export efforts.

EXIM, in particular, has important tools it can use to support U.S. LNG exporters, and the agency should muster its resources to maximize American jobs and economic benefits by supporting U.S. LNG projects and not competing liquefaction efforts in other countries.

 

Fred H. Hutchison is president and CEO of LNG Allies.

Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.

Do NOT follow this link or you will be banned from the site!