• 30 mins Retail On Pace For Most Bankruptcies And Store Closures Ever In One Year: BDO
  • 10 minutes America Could Go Fully Electric Right Now
  • 22 hours Majors Oil COs diversify into Renewables ? What synergies forget have with Solar Panels and Wind Tirbines ? None !
  • 10 hours OP article : "Trump blasts Biden Fracking Plan . . . "
  • 5 mins Clean Energy Is Canceling Gas Plants
  • 7 hours Biden has Obama do a Philadelphia Rally for him. Less than 100 supporters turned out. Really.
  • 21 hours Vote Biden for Higher Oil Prices
  • 1 day America's Frontline Doctors - Safely Start Living Again!
  • 2 days France Sees 10.6% EV Market Share In September — 4× Growth Year On Year
  • 39 mins Biden denies fracking ban
  • 4 hours "COVID Kills Another Oil Rally" by Tom Kool 10/16/2020
  • 1 hour Conoco Pledges ‘Net-Zero’ Emissions in Break With U.S. Rivals
  • 2 days Tesla Model 3 Is September's Top Selling Car of All Vehicles in Switzerland
  • 2 days TX NATGAS flaring
  • 12 hours A sneak peak into the US election
  • 2 days GPOR - Gulfport Oil - Why?
  • 2 days covid. stop the carriers and thus stop the virus.
OPEC+ Is On The Brink Of A Crisis

OPEC+ Is On The Brink Of A Crisis

OPEC+ members are on the…

Oil Jumps On U.S. Stimulus Hopes

Oil Jumps On U.S. Stimulus Hopes

Following the biggest daily slide…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

A Perfect Storm Is Brewing For US LNG

That the U.S. energy industry would be among those hardest hit by a full-blown trade war between Washington and Beijing was a no-brainer. Yet the extent of the fallout as the war continues is only becoming evident now, as some companies find it hard to secure the funding for their ambitious LNG projects.

According to the Bank of America Merrill Lynch, a number of companies may delay their final investment decisions on new LNG capacity to next year because of U.S.-Chinese trade tensions. Bloomberg reports these include Tellurian and NextDecade, as well as other companies focused exclusively on LNG.

“We see delays as likely given current pricing headwinds, no resolution yet on the U.S.-China trade war, and minimal contract announcements in recent months,” BofA analysts wrote in a recent note to clients, referring to Tellurian’s US$28-billion Driftwood LNG project in Louisiana.

While the companies themselves are not too talkative when it comes to possible obstacles to the so-called second wave of LNG projects in the U.S., the facts are not encouraging: China has imported no U.S. LNG since March, according to data from ClipperData. Bloomberg data is even gloomier: it suggests no U.S. LNG has made its way into China since February. No wonder, since Beijing first imposed a 10-percent tariff on the commodity and then upped this to 25 percent in retaliation for U.S. tariffs. Related: Canada’s Oil Crisis Is Far From Over

Yet there is another aspect of the trade war that is more damaging to U.S. LNG producers. To secure funding for these projects that typically cost billions, U.S. companies need long-term commitments to convince banks the projects are viable. Chinese buyers were the natural choice for these long-term commitments but this is no longer the case as Chinese investors shun U.S. projects amid the war.

To add insult to injury, the gas price context is increasingly unfavourable and could add justification to delays in final investment decisions. U.S. energy companies are producing too much gas at a time when domestic demand is stalling and global demand is being met by a growing number of countries. LNG projects are also suffering the effects of low gas prices. As RBC recently forecast, this year, the natural gas market will remain oversupplied, and this oversupply will extend into 2020 as well.

U.S. LNG exports were hailed as a double blessing: on the one hand, expanding U.S. companies global presence on the LNG market and on the other, relieving a persistent natural gas glut resulting from the growth of the shale oil and gas industry. The size of this relief grew from just 2.92 billion cu ft in 2013 to 1,083 billion cu ft last year. Now, its further growth that could turn the United States into the world’s top LNG exporter by 2024 is under threat.

Meanwhile, Big Oil majors, which are a lot more resilient to any single segment of the energy industry, are forging ahead with their own LNG projects outside the U.S. Mozambique is a hot spot and so is Papua New Guinea. They are adding capacity that would ultimately compete for market share with U.S. independents. That’s just one more headache-generating problem for these independents to deal with.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News