Europe’s rush to shake off Russian gas dependence and Asia’s push to buy higher volumes of American energy while negotiating trade deals have created a booming export deal market for U.S. LNG exporters and developers, even at increased liquefaction fees.
Year to date, American LNG developers have signed sales and purchase agreements (SPAs) for existing and future export plants for a total of 29.5 million metric tons per year, according to data from consulting firm Rapidan Energy Group cited by Reuters.
The volume of newly contracted U.S. LNG more than quadrupled between January and October compared to the 7 million metric tons per year (mtpa) contracted for the whole of 2024.
The U.S. LNG industry is now on track to have signed the second-highest export volumes on record, trailing only 2022, when buyers in Europe turned en masse to American gas as Russian pipeline supply to Europe slumped and stopped for many EU markets, including Germany.
Encouraged by the Trump Administration’s energy policy, LNG developers are taking advantage of the market and regulatory tailwinds to approve investments in new projects.
So far this year, Australia’s Woodside has announced the FID for the Louisiana LNG project and plans to start production in 2029. In July, Venture Global took FID and successfully closed the $15.1 billion project financing for the first phase of the company’s third project, CP2 LNG, together with the associated CP Express Pipeline. Top U.S. exporter Cheniere has made a positive FID for the Corpus Christi Midscale Trains 8 & 9 and Debottlenecking Project. NextDecade has decided to invest $6.7 billion in the expansion of its Rio Grande LNG facility in Texas, in the second Rio Grande expansion announced this year, while Sempra approved a $14 billion Port Arthur LNG Phase 2 expansion.
U.S. developers of six export projects have made FIDs and secured financing so far this year, bringing total global LNG finance to a record of $72 billion, energy commodity shipping broker and advisor Poten & Partners said last month.
“Six US FIDs in one year is unprecedented– the highest number before this year was three US projects. The liquefaction finance tally could continue to climb in the final quarter of this year as a few more projects – also in the US – appear to be nearing FID,” Poten & Partners said.
In the near term, the U.S. is set to add 5 billion cubic feet per day (Bcf/d) in LNG export capacity in 2025 and 2026 alone, as Plaquemines LNG and Corpus Christi LNG Stage 3 projects come online, the Energy Information Administration said in its Short-Term Energy Outlook in October. Additions to LNG export capacity are set to boost total U.S. LNG exports to 14.7 Bcf/d in 2025 and to 16.3 Bcf/d in 2026, up from 11.9 Bcf/d in 2024, according to the EIA estimates.
The surge in U.S. LNG exports and the expected jump in Qatari LNG shipments once Qatar’s mega expansion projects are completed in 2027 have stoked fears of a coming LNG glut that could depress prices.
U.S. developers appear unfazed by this prospect and are even raising their liquefaction fees as project costs soar amid persistent higher financing rates, labor shortages, and an increase in prices of materials.
In March this year, most U.S. liquefaction fees were being discussed at $2.65 per million British thermal unit (MMBtu) to $2.95 per MMBtu, “as EPC cost escalations show no sign of abating,” Poten & Partners said at the time.
“Higher raw material prices, which are seeing further escalation because of tariffs, coupled with rising labor and financing costs are having a pronounced impact on US LNG liquefaction project implementation. The cost increases make it challenging for developers to keep engineering, procurement and construction (EPC) contracts valid as they try to move ahead with their LNG export projects,” the broker and advisor said.
Now U.S. LNG exporters and developers are asking about 15% higher liquefaction fees compared to the 2023 average of about $2 per MMBtu, Poten & Partners business intelligence head Jason Feer told Reuters this week.
And they are so far getting these higher fees in new contracts. Buyers are still willing to pay higher liquefaction fees to secure American LNG, which is seen in Europe as a means to cut off Russian supply by 2027 and in Asia as a lever to pull in tariff and trade deal talks with the Trump Administration.
By Tsvetana Paraskova for Oilprice.com
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