U.S. LNG Exports Are Surging Despite Jump In Shipping Costs

Despite a 65-percent jump in the cost of U.S. exports of liquefied natural gas to the biggest import market, Asia, American LNG shipments abroad have soared to record highs and are likely to reach new all-time highs later this year.

According to estimates from independent energy research firm Rystad Energy, the short-run marginal cost (SRMC) of U.S. LNG exports to the Asian market has risen to about $5.60 per million British thermal units (MMBtu) as of June 2021. That cost is a massive 65-percent higher than in the middle of last year, when LNG demand was depressed with the pandemic, and is 30 percent higher than the 2020 average of $4.30 per MMBtu, Rystad Energy estimates in its new report.

Despite the higher costs, U.S. exporters of LNG are not expected to shut in capacity as they did last year when demand was low. This year, LNG demand globally, including in the most important market, Asia, has rebounded strongly. 

“Despite the significant cost increase, the US is not the most expensive supplier to Asia this year, however. The comeback of Egyptian LNG to the market has seen the North African country assume the role as the marginal supplier of LNG, with an SRMC of about $6.30 per MMBtu,” Rystad Energy said.

Even the higher costs would be absorbed because of the strong demand in Asia and the high Asian spot prices of around $12 per MMBtu, according to the research firm.

By Tsvetana Paraskova for Oilprice.com

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