Page 5 - GLNG Week 25 2021

GLNG COMMENTARY GLNG

transportation costs – a global trend – Rystad or 75%, can be supplied at a cost below $3 per
noted that US LNG costs had also been boosted mmBtu [$82.98 per 1,000 cubic metres], includ-
by a recovery in domestic natural gas prices. ing delivery to Asia. Furthermore, 225mn
Indeed, the EIA projects that the Henry Hub tonnes can be delivered to the market at a price
spot price will rise to $3.19 per 1,000 cubic feet below $2 per mmBtu [$55.32 per 1,000 cubic
($90.34 per 1,000 cubic metres) in 2021, from metres],” commented Rystad’s vice-president of
$2.11 per 1,000 cubic feet ($59.76 per 1,000 gas markets, Sindre Knutsson. “This shows the
cubic metres) last year. diversity of the LNG market compared to other
Interestingly, the US was the most expensive fuels, and also illustrates why LNG proved to be
supplier globally last year, despite the lower so robust during 2020 when COVID-19 hit the
SRMC of LNG being shipped to Asia, but is not market with full force,” he added.
expected to be the most expensive supplier to
Asia in 2021. This is because Egypt has restarted What next?
LNG exports, becoming a marginal supplier, US LNG exports rose to a record monthly high
with an SRMC of about $6.30 per mmBtu of 6.5mn tonnes in May and Rystad said they
($174.26 per 1,000 cubic metres). Rystad noted, may keep climbing to new peaks. The EIA’s
however, that Asian spot LNG prices are around projections show some fluctuations, mean-
$12 per mmBtu ($331.92 per 1,000 cubic while, with the agency forecasting that US LNG
metres), allowing even for the costs of Egyptian exports will increase to a new high of 9.83bn
LNG to be absorbed. cubic feet (278.4mn cubic metres) per day in
the second quarter of this year, but will then dip,
Still profitable not exceeding that level until the first quarter of
The SRMC is not the only cost factor to be influ- 2022.
encing the LNG market, though. Rystad also The EIA also anticipates that over the whole
highlighted pre-tax liquids revenue, which it of 2022, US LNG export volumes will be lower
said is calculated as the pre-tax revenue from oil than in 2021, at 9.22 bcf (261.1 mcm) per day,
activity for the upstream assets that feed LNG down from a projected 9.38 bcf (265.6 mcm) per US LNG exports
plants, divided by LNG production. day this year. If this proves to be correct, it would
Thanks to higher oil prices in recent months, be the first annual decline in US LNG export rose to a record
and taking into account pre-tax liquids reve- volumes since 2013, when the country only had monthly high of
nue, many integrated LNG projects have seen one export terminal, in Alaska, which has since
improved competitiveness so far this year, the been shuttered while new liquefaction terminals 6.5mn tonnes in
consultancy said. Thus the variable cost of LNG came online in the Lower 48 states.
can be offset by oil production revenues, and Reuters reported earlier this month that it had May.
Rystad said that as a result, some projects glob- not seen any other analyst project that US LNG
ally can even be profitable even if LNG prices fall exports would decline in 2022. The prediction
to zero. It cited Qatar’s Qatargas 1 LNG Train 1 becomes even more perplexing given that more
as an example. liquefaction capacity is due to enter service in
That said, the consultancy does not expect the US over the coming months, at Cheniere
prices to fall to zero, or even to a level in line with Energy’s Sabine Pass terminal, as well as Venture
the SRMC of Egyptian LNG. Both European Global LNG’s new Calcasieu Pass plant.
and Asian LNG demand are projected to remain The EIA has not given a reason for its pro-
robust, bolstered by restocking, high carbon jected LNG export decline, and has also fore-
dioxide (CO2) prices and lower-than-expected cast that dry gas production will rise to a new
Russian pipeline gas exports to Europe, as well record high in 2022. It is possible that the agency
as the ongoing post-pandemic recovery. will revise its forecast in upcoming outlooks. For
“Of the 393mn tonnes of LNG that we expect now, there does not appear to be any obvious
to be produced in 2021, over 300mn tonnes, reason for US LNG exports to dip next year.™

Week 25 25•June•2021 www. NEWSBASE .com P5