How US LNG exports to Europe have doubled
Sabine Pass, Houston “LNG” is written in large white letters on the 300 meter long blue tanker with its four thick white containers on the deck, which is slowly disappearing towards the horizon. The next ship called “Alicante” is already filling up its huge tank before making its way towards Europe starts.
Two tankers cast off here every day at Sabine Pass, the lagoon that separates Texas from Louisiana. The largest US liquid gas company Cheniere operates its LNG plant here.
The gas arrives via pipeline from Texas and Louisiana, but also from other states such as Oklahoma and Pennsylvania. In the 345-hectare facility on the Gulf of Mexico, it is cooled in giant tanks to minus 161 degrees Celsius and thus liquefied. Compressed as liquefied natural gas (LNG), it then reaches the special tankers via pipes.
Since Russia’s attack on Ukraine in February last year, the number of tankers leaving Sabine Pass and other ports on the US Gulf Coast has increased significantly. More and more of them are moving in the right direction Europe on – most recently in the direction of Germany, where the floating regasification plant in Wilhelmshaven can convert LNG back into gas. The export of liquefied natural gas from the USA According to the raw material data service Kpler, the number of exports to Europe has doubled from 2021 to 2022.
In Germany, the American liquid gas keeps people from freezing and keeps the factories working. In the USA the strong demand from Europe gives an entire region a new boost.
Port Arthur is experiencing a bit of a renaissance
The recent LNG boom has already breathed new life into the town of Port Arthur, ten kilometers away. Construction workers are building blocks of houses in the almost deserted city center. “Companies are building offices and apartments for their employees there,” says retired refinery worker Fred Schneider. He grew up in Port Arthur and now works at the Gulf Coast Museum.
Here, Schneider tells visitors how oil and gas once made the city, where celebrities like singer Janis Joplin and artist Robert Rauschenberg were born, wealthy – until investment waned and the oil industry needed fewer and fewer workers.
“Port Arthur is experiencing a bit of a renaissance with the LNG boom,” Schneider says happily. There are plans for new restaurants and cinemas. “Just like it used to be when I was a kid here.”
The Water View RV Resort campsite, about 20 minutes’ drive from the Cheniere site, is also fully booked. Neat Fifth Wheeler camping trailers are abandoned, the owners have driven to work. “They all work in oil and gas,” says the manager. According to Zip Recruiter, LNG workers make between $34 and $85 an hour, which is extremely good.
Construction work can be seen all over the region. Large trucks transport bulldozers, excavators and folded cranes on the highways. Cheniere also intends to further expand the plant at the Sabine Pass in the near future and increase the capacity by a further 20 million tons of LNG to a total of 50 million tons per year.
LNG exports as a US government geopolitical tool
“It’s amazing to see how, after decades of worrying about energy dependency, the US is now the largest exporter of LNG and one of the largest exporters of oil,” commented Daniel Yergin, energy historian and vice-chairman of S&P Global, the location. “America is back in the most dominant position in the world in energy that it has held since the 1950’s.”
According to estimates by the Energy Ministry’s information service, Eia, LNG exports will increase by a further 14 percent this year, with the majority going to Europe.
For the government in Washington, LNG has become an important tool to defend the position of the Allies in the Ukraine war Russia to hold together. This is another reason why President Joe Biden, despite his green climate policy, allowed higher liquid gas exports and new LNG terminals.
Read more about the topic in the Handelsblatt:
Just this week, another LNG terminal was approved in Port Arthur, that of Sempra Infrastructure and Conoco Phillips is to be built. “LNG expansion is imperative for America’s energy security,” said Republican Texas Gov. Greg Abbott. And it brings more “jobs for hard-working Texans”.
Cheniere CEO Fusco: “Don’t let our friends in Europe down”
Jack Fusco, Cheniere’s CEO, is proud to have shipped 70 percent of the 638 tankers with LNG to Europe last year. 2022 was a “decisive year” for him. The energy crisis in Europe had also hit him personally, he said recently at the world’s largest oil and gas trade fair, S&P’s Ceraweek, in Houston, Texas. “You know, my parents came here from Italy. We also felt a moral obligation not to let down our friends in Europe.”
The German State Secretary Jörg Kukies, who traveled to Houston especially for the oil fair, also likes to hear the words: “We need the LNG,” he says.
In the previous year, 60 percent of exports went to Asia and only 40 percent to Europe, says Fusco. That’s different now. Fusco holds up his phone, where a live app is tracking the Cheniere tankers: “There are only a few who are heading to Asia right now.”
But Fusco also knows why. Knows that countries like Indonesia have switched back to coal in part because so many ships have been diverted to Europe – not only out of solidarity, but also because they were simply outbid by European countries.
The demand for LNG will also remain high in Asia, says Fusco – and is reacting with higher production: Cheniere is not only expanding the plant at Sabine Pass, but also in the Texas oil town of Corpus Christi. Ships are also leaving Freeport today, where a huge explosion paralyzed the Cheniere plant for months last year.
>> Read here: The US is experiencing a double energy boom
By the end of the decade, Fusco plans to produce and export more than 90 million tons of LNG annually. “And every ship of ours comes with all the information about its official carbon footprint,” he assures. To maintain its position as a gas powerhouse, the US Department of Energy is working with the industry on environmental standards for certified gas.
Import systems become export systems
The American LNG strategy has undergone an amazing change. “The systems on the Gulf Coast were actually intended for import. Now they have become export facilities,” explains Greg Ebel, CEO of the pipeline specialist Enbridgewhich supplies the Gulf Coast in Texas and Louisiana with its products.
Also Qatar Energy and exxon Mobil are converting the Golden Pass import terminal into an export terminal one kilometer as the crow flies from the Cheniere facility at Sabine Pass for ten billion dollars.
At the beginning of the century, Americans primarily wanted to import gas, not export it. The easily accessible gas fields were mostly at their end. Then came the fracking boom that made the US a net exporter of energy for the first time in 2019.
But fracking slipped into a crisis because the expensive technology was not worth it given the low world market prices for oil and gas. In 2020, fracking companies filed for bankruptcy in droves. Until the picture changed again with the end of the Covid pandemic and Russia’s attack on Ukraine. Demand and world market prices rose rapidly. According to the US Department of Energy, the American gas fields produced more than ever before at more than three billion cubic meters per day – and the trend is rising.
What happens if demand from Europe drops again?
“We’re sitting on resources for decades, all of which we have yet to tap into,” predicts Nick Dell’Osso, CEO of Chesapeake Energy, a company that filed for bankruptcy protection itself less than three years ago and was bought by private equity investors. This does not only apply to the southern states of the USA, where the Permian Basin lies under Texas and New Mexico. Dell’Osso emphasizes that there is still a lot of gas to be found in the Northeast with the Marcellus field in Pennsylvania.
Corey Prologo, head of trading at the logistics company Trafigura, is also convinced that the LNG boom will continue for a long time and that LNG’s role in relation to oil is becoming increasingly important. Oil export facilities can also be converted into LNG export facilities, he says. “It’s happening now, and we’ll see more of it.”
And what happens if demand from Europe collapses again at some point? Finally, the EU relies on alternative energies and wants to become more independent. “One has to ask oneself whether the billions invested are worth it if the Europeans don’t want to give long-term purchase guarantees,” points out Naomi Boness, Managing Director of the “Natural Gas Initiative” (NGI) at Stanford University.
Colin Gruending, president of pipeline specialist Enbridge, believes the risk is low. “There will be high global demand for gas for a long time to come,” he is convinced. “And now we have a moral responsibility that the tankers continue to go to Europe.”