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Editorial Dept

Editorial Dept

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Global Energy Advisory - 13th July, 2018

U.S. LNG producers are racing to add production capacity amid forecasts for strong growth in demand, with the total—concentrated in Louisiana and Texas—set to reach 10 billion cubic feet daily by the end of next year, from about 4 billion cubic feet a day today. And yet, all this capacity will not be enough to prevent the supply crunch that has been predicted by Shell.

The crunch will be a result of a shortage in final investment decisions on new LNG capacity in the United States, which is shaping up as the largest emerging LNG exporter globally. And the shortage of FIDs itself is a result of producers’ uncertainty about future demand. This uncertainty has pushed them to be creative as buyers begin to shy away from long-term, fixed-price contracts, opting for shorter deals.

So, U.S. LNG producers began offering buyers low-priced LNG in exchange for investing in the construction of the liquefaction trains that will produce this LNG. The approach is working and has helped Cheniere Energy and its sector players secure future supply. However, even that won’t be enough if demand continues to grow so strongly.

By 2025, Cheniere has warned, the world will need an additional 10.5 billion cubic feet daily in LNG capacity. By 2030, another 16.4 billion cubic feet daily will need to be added. But long-term contracts that fund new capacity will continue to get harder to secure as buyers continue to prefer shorter deals and the spot market.

The…




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