Low US gas prices a spur for new LNG export projects: executives

Florence, Italy — Low US gas prices are bolstering the prospects of companies looking to develop new LNG export projects, as customers increasingly expect those domestic prices to remain low or fall further, executives at an LNG forum in Florence, Italy, said Monday.

Speaking at the Baker Hughes AM2020 conference, the heads of Venture Global and NextDecade voiced optimism about the growth in worldwide demand for natural gas, and played down the weakness of global LNG spot prices as a short-term issue. Both companies have projects on the table, although not yet developed.

Their comments echoed the bullish view on LNG exports of US assistant secretary for fossil fuels, Steven Winberg, who told S&P Global Platts this week that US LNG exports could rise by 50% over the next three to four years.

"We're primarily focused on long-term contracts and being part of diversified fuel supply portfolios so the current US gas environment is extremely bullish for the market in general," said Mike Sabel, Co-CEO of Venture Global, which is developing LNG export projects in Louisiana. Sabel added:

"Our customers view the long-term gas prices in the US as very stable and maybe even trending down."

"There's massive demand for LNG. It's growing extremely well and we think that will continue for a long time. From our perspective a lot of people in the market continue to underestimate what that growth is going to be, so there's huge opportunities to innovate," he said.

Sabel said one disadvantage for US LNG developers was a difficult regulatory approval regime for new projects, saying the regime right now was relatively good, but the future unpredictable. "It can be a meaningful disadvantage relative to other markets," he said.

However, NextDecade CEO Matt Schatzman, whose company is developing projects in Texas, was similarly bullish overall on the prospects for US LNG exports, saying domestic gas prices of around $2/MMBtu or lower were "very helpful to exporters."

"The spot prices for LNG are very low right now, probably $4/MMBtu or less into Asia. That's not sustainable and doesn't help the development of LNG projects, but we think the short-term indications in the LNG market are not indicative of the long-term requirements," he said.

With LNG buyers seeking to eliminate price risk, the risk for US gas exports would be borne not by LNG exporters, but by US upstream gas producers, Schatzman said.

He went on to say that major economies, such as India, had already decided on the switch to gas, based not only on concerns about global warming, but the need to improve local air quality.

METHANE ISSUE

Noting continued environmental concern about methane emissions, Schatzman said change was already underway. "Our industry will do a much better job reducing methane emissions, it has to, not just for the climate. It's economically better for us too," he said, adding:

"Pipelines are getting better in the US, the new pipelines are incredibly tight, our facilities are tight, ships are getting better, containment systems are better. Everything about our industry has gotten better."