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North American LNG Projects Plagued By Price Volatility

New U.S. and Canadian LNG export projects show signs of accelerating but volatile natural gas prices are making bets on future supply and demand difficult, industrial market intelligence provider Industrial Info Resources (IIR) said in new research on Friday.

"But too much too fast could overwhelm the sector. Volatility in natural gas prices makes it difficult to bet on the future and exports take away from domestic needs," IIR said in a statement.  

In Canada, the provincial government of British Columbia has allowed the US$7.2 billion floating Ksi Lisims LNG facility to enter the environmental review process. The move followed consent for Cedar LNG, another project planned for Canada's western coast, and both come on the heels of a positive step forward for Shell's mega project at Kitimat.

Those LNG facilities, if progressed to construction and operations, could offer Canada an export outlet to the prized North Asian markets, according to IIR.

The U.S. is also progressing with new LNG export facilities.

Developers of U.S. LNG export facilities could launch $100 billion worth of new plants over the next five years as high prices and the need for energy security create strong momentum for long-term LNG demand and contracts. 

The United States is set to overtake Qatar and Australia as the world's top LNG exporter this year after Freeport LNG resumes operations, energy consultancy Wood Mackenzie said in a recent report.   Related: Spain Calls On Importers Not To Sign New LNG Deals With Russia

But U.S. natural gas production is expected to hover around 100 billion cubic feet per day (Bcf/d) for the foreseeable future, per IIR's analysis.

"Natural gas remains an essential component of the domestic energy mix and production is expected to linger close to the five-year average," it said.

According to the EIA, the U.S. benchmark spot Henry Hub prices are set to go up from the February lows due to rising demand from the Freeport LNG export facility reopening, seasonal increases in demand in the electric power sector, and relatively flat domestic gas production for the rest of 2023 as producers reduce drilling in response to lower prices. 

By Tom Kool for Oilprice.com

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Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations More