Most of the proposed U.S. liquefied natural gas export projects won’t get built amid stiffening competition from foreign competitors who will flood the market with the supercooled gas as demand begins to slow, a new study finds.
As FuelFix.com reports, five U.S. LNG projects already under construction—including Cheniere’s two terminals in Louisiana and Corpus Christi—will cross the finish line, but beyond that, construction appears “increasingly unlikely” for the remaining proposals, according to the latest study unveiled Tuesday by a task force of natural gas experts assembled by the Brookings Institution, a Washington, D.C.-based think tank.
It’s the latest report to raise doubts about the flurry of multibillion dollar proposals announced in recent years that would soak up vast supplies of cheap U.S. natural gas destined for markets in Asia.
“We believe it will be increasingly difficult to finance new LNG projects, due to high upfront costs in combination with a substantial number of uncertainties which influence supply and demand,” the report says.
Developers have been rolling out proposals on the assumptions that U.S. natural gas prices will remain at record low levels while LNG prices in Asia and Europe remain high, offering North American exporters attractive margins. Developers also placed bets that U.S. LNG, which is linked to natural gas prices, would allow them to hold a competitive edge over foreign suppliers, whose LNG is tied to crude prices, which were relatively high until they began falling late last year.
The report found that there are flaws in those assumptions that call into question whether U.S. LNG projects will be successful.
“While the projected number of North American LNG export facilities is massive, closer examination of the projects’ financial realities offer a more nuanced story,” the report states.
