The first major U.S. LNG shipment for export launched this week right into an oversupplied global gas market.
Experts say the market could stay soft for several years, but even so, this first shipment of U.S. gas, sold by Cheniere, marks what is a new role for the U.S. in the global energy arena and could be a changing dynamic in the global gas market. When U.S. gas exports were first proposed, prices in other parts of the world were much higher.
An LNG carrier ship is docked at the Cheniere Energy terminal in this aerial photograph taken over Sabine Pass, Texas.Lindsey Janies | Bloomberg | Getty Images
Chris Holmes, vice president global gas and LNG at IHS, said he expects the market to bottom out in 2018 and then tighten up again. "At the moment, we think in the current environment, nobody's going to invest in plants. We'll see it tighten up in the early 2020s. Then you start looking at opportunities."
Cheniere president of marketing Meg Gentle spoke to the CERAWeek energy conference in Houston on Tuesday, as Cheniere's first shipment was getting set to sail to Brazil.
"The U.S. will be one of the biggest three suppliers of LNG by 2020," she said, adding that U.S. liquefied natural gas exports should total about 8 billion cubic feet by then.
U.S. gas enters a world market already supplied by Qatar, and there is more new supply coming from Australia. "Over the next five years, Australia will triple LNG production," said Josh Frydenberg, Australia Minister for Resources, Energy and Northern Australia. He said Australia will overtake Qatar as the largest exporter.
But Gentle and others point out that U.S. supply is plentiful and cheap to produce currently.
"The near-term oversupply is masking all rational thinking about the long term," said Martin Houston, founder of Parallax Energy. Houston was also speaking at the CERAWeek conference, and he announced this week that he was launching a new company with ousted Cheniere CEO Charif Souki.
"Buyers are being cautious because they can be," he said, adding they have a view of cheap "LNG slopping about the system."