Even as the sector works to overcome objections to pipeline development, rising European demand has contributed to a surge in US natural gas investment. According to the most recent US data available, production of the fuel hit 3.1 trillion cubic feet for the month of October, an all-time high and an increase of about 50% from the level a decade ago. According to Steven Miles, a fellow at Rice University’s Banker Institute in Houston, the market has been expanding ever since Russia started cutting back on exports to Europe in the summer of 2021.
The US shale revolution of the first decade of the twenty-first century, which ultimately resulted in the country turning into a net exporter of fuel in 2017, precedes that. The development has not been constant, as falling natural gas prices have discouraged investment and caused one of the main participants in the industry, Chesapeake Energy, to file for bankruptcy in June 2020.
But in light of altering geopolitical factors, energy corporations now have more faith in the fuel’s long-term demand prognosis.
According to Eli Rubin of the consultancy EBW Analytics Group, the long-term demand “was not nearly as evident as it is today” five years ago. “We have a healthy new regard for natural gas’s function in supplying energy security and for its role in helping to moderate consumer pricing, especially in light of Russia’s invasion of Ukraine.
There was a significant investment in infrastructure to convert gas into liquefied natural gas even before the invasion (LNG). 14 new liquefaction terminals have just received approval, with the first one scheduled to open in 2024.
We may potentially treble US LNG exports over the next five years, Rubin stated.
The effort comes as major energy corporations benefit from high commodity prices, which have made it possible for the sector to spend aggressively while also increasing share buybacks and dividends. Even before to the invasion, substantial infrastructure investment had been made to transform gas into liquefied natural gas (LNG). The first of 14 new liquefaction terminals, slated to start in 2024, has now obtained approval.
Over the following five years, US LNG shipments may potentially triple, according to Rubin.
The initiative comes at a time when large energy businesses are reaping the rewards of high commodity prices, which have allowed the industry to spend impulsively while simultaneously raising share buybacks and dividends.
Pipeline obstruction
Although there has been some limited globalization of the natural gas market due to the growth of LNG, the dynamics are still very regional. The benchmark European TTF contract is currently trading at prices that are more than six times higher than the American Henry Hub contract.
Due to this pricing difference, LNG exports are priced more similarly to US levels, which creates the opportunity for “middlemen” to transport the cargoes to Europe and “sell them at European prices,” according to Miles.
More consistent prices across areas might result from significantly increased US natural gas exports, but probably not for several years.
The absence of pipeline capacity, particularly in the northeastern United States, continues to be a problem for the sector.
The Marcellus Shale, the largest natural gas basin in the US and primarily located in Pennsylvania are constrained by a lack of infrastructure.
A project known as the Mountain Valley Pipeline is one possibility, but it has been put on hold for the past five years due to opposition from landowners and environmentalists.
Climate activists and elected officials are “definitely a lot stronger than they were” in their opposition to projects backed by industry, according to Rubin.
But during times of peak demand, a lack of infrastructure can make price volatility worse. A small portion of New England’s heating comes from LNG, which is located in the northeastern United States. However, the area, which typically experiences some of the nation’s coldest temperatures, is renowned for opposing more pipeline capacity.
“New England is fighting with Europe for a spot LNG cargo during a cold spell,” said Rubin. “They have to pay more than in Europe for the freight to go to New England.”
Even as the sector works to overcome objections to pipeline development, rising European demand has contributed to a surge in US natural gas investment. According to the most recent US data available, production of the fuel hit 3.1 trillion cubic feet for the month of October, an all-time high and an increase of about 50% from the level a decade ago. According to Steven Miles, a fellow at Rice University’s Banker Institute in Houston, the market has been expanding ever since Russia started cutting back on exports to Europe in the summer of 2021.
The US shale revolution of the first decade of the twenty-first century, which ultimately resulted in the country turning into a net exporter of fuel in 2017, precedes that.
The development has not been constant, as falling natural gas prices have discouraged investment and caused one of the main participants in the industry, Chesapeake Energy, to file for bankruptcy in June 2020.
But in light of altering geopolitical factors, energy corporations now have more faith in the fuel’s long-term demand prognosis.
According to Eli Rubin of the consultancy EBW Analytics Group, the long-term demand “was not nearly as evident as it is today” five years ago.
“We have a healthy new regard for natural gas’s function in supplying energy security and for its role in helping to moderate consumer pricing, especially in light of Russia’s invasion of Ukraine. There was a significant investment in infrastructure to convert gas into liquefied natural gas even before the invasion (LNG). 14 new liquefaction terminals have just received approval, with the first one scheduled to open in 2024.
We may potentially treble US LNG exports over the next five years, Rubin stated.
The effort comes as major energy corporations benefit from high commodity prices, which have made it possible for the sector to spend aggressively while also increasing share buybacks and dividends.
Even before to the invasion, substantial infrastructure investment had been made to transform gas into liquefied natural gas (LNG). The first of 14 new liquefaction terminals, slated to start in 2024, has now obtained approval.
Over the following five years, US LNG shipments may potentially triple, according to Rubin.
The initiative comes at a time when large energy businesses are reaping the rewards of high commodity prices, which have allowed the industry to spend impulsively while simultaneously raising share buybacks and dividends.
Pipeline obstruction
Although there has been some limited globalization of the natural gas market due to the growth of LNG, the dynamics are still very regional.
The benchmark European TTF contract is currently trading at prices that are more than six times higher than the American Henry Hub contract.
Due to this pricing difference, LNG exports are priced more similarly to US levels, which creates the opportunity for “middlemen” to transport the cargoes to Europe and “sell them at European prices,” according to Miles.
More consistent prices across areas might result from significantly increased US natural gas exports, but probably not for several years.
The absence of pipeline capacity, particularly in the northeastern United States, continues to be a problem for the sector.
The Marcellus Shale, the largest natural gas basin in the US and primarily located in Pennsylvania is constrained by a lack of infrastructure.
A project known as the Mountain Valley Pipeline is one possibility, but it has been put on hold for the past five years due to opposition from landowners and environmentalists.
Climate activists and elected officials are “definitely a lot stronger than they were” in their opposition to projects backed by industry, according to Rubin.
But during times of peak demand, a lack of infrastructure can make price volatility worse.
A small portion of New England’s heating comes from LNG, which is located in the northeastern United States.
However, the area, which typically experiences some of the nation’s coldest temperatures, is renowned for opposing more pipeline capacity.
“New England is fighting with Europe for a spot LNG cargo during a cold spell,” said Rubin. “They have to pay more than in Europe for the freight to go to New England.”