LNG exports push back against anti-globalization trends

While “globalization” has evolved into a dirty word in many nationalist movements around the world, the growth of liquefied natural gas to power much of the world  is pushing back against such political trends.

Shipping LNG on vessels across oceans will increasingly help fuel both the developing and developed world from emerging Asian markets to Europe to Latin America, said  Michael Stoppard, IHS Markit chief global gas strategist.

“LNG has moved from being a continental or regional business to being a, dare I say, globalized business,” Stoppard said. “It is gas and not oil that will lie at the heart of your global volume growth.”

Via the expanded Panama Canal, even Peru shipped some LNG to the United Kingdom in February. Royal Dutch Shell was the buyer. “If that isn’t global I don’t know what is,” Stoppard said.

Annual global gas demand will grow from 3.6 trillion cubic meters to 5.4 trillion cubic meters by 2040, he said. “We keep looking for oil and finding gas,” Stoppard said of exploration efforts.

The three global hubs for LNG exports will be Qatar, Australia and increasingly the United States, especially along the Texas and Louisiana Gulf Coast. That started early last year when Houston-based Cheniere Energy began shipping LNG from its Sabine Pass Terminal near the Texas border. A slew of other projects are underway.

Cheniere founder Charif Souki said he helped “break the model” for regional gas. The only problem for him is he was ousted from his company at the end of 2015. As the market weakened, activist investors like Carl Icahn grew weary of Souki’s greater ambitions to keep expanding and pushed for the change.

So Souki co-founded Houston-based Tellurian Inc. as an LNG exporting competitor. The company went public in February. Tellurian is developing the $12 billion Driftwood LNG project south of Lake Charles, Louisiana as part of the next wave of LNG export projects. The goal is to bring it online in 2022 with the expectation that global demand growth by then will have wiped away the anticipated glut of LNG in the coming years.

The problem is U.S. LNG developers are having trouble finding long-term buyers to help finance the projects, as Cheniere did with 20-year contracts. Buyers are increasingly looking for short-term deals and greater flexibility. Souki said the increasing global demand will make quality projects viable, even if the buyers come increasingly from emerging markets, rather than developed nations like Japan, which was originally expected to be a much larger LNG buyer.

“We’re very confident we’re going to find buyers for our gas. I absolutely have no doubt the global gas market is going to continue to grow,” Souki said. “It seems we have a couple of decades of ample gas supply in the U.S. at very cheap rates, so I like our position.”

He added, “We think we can offer the low-cost gas on the global basis.”

But trends for LNG exports are becoming much more fluid and seasonal, and difficult to predict long term.

Because of weather and seasonality, premium prices move from Asia to southern Europe to the Middle East.

“We’ll listen to customers. I’m not going to try to sell a car to someone who’s looking for a boat,” Souki said. “The business model will find itself simply because the world needs this gas.”