American Oil and Gas Reporter - April 2018 - 74

VISION2020
LNG exports in 2017, primarily because of growing demand
from the new gas-fired power plants, which ultimately will be
supplied by pipeline imports from the United States. The delays
in the startup of domestic pipelines in Mexico connecting to
U.S. export pipelines led to higher demand for LNG imports.
The strong demand for LNG imports in Mexico is expected to
continue in 2018.
In South Korea, reduced nuclear generation due to extended
maintenance led to higher LNG imports in 2017, along with
commissioning of the new terminal's Samcheok storage tanks.
Two long-term LNG contracts started from the United States,
and 20 percent of U.S. LNG that went to South Korea were spot
purchases. Lack of hydro generation in southern Europe led to
more spot purchases from U.S. export terminals as well.
It is important to note that more than 60 percent of U.S. LNG
was sold on a spot basis to 25 countries globally, even though
more than 90 percent of U.S. LNG exports are contracted on a
long-term basis. A unique feature of U.S. LNG contracts is flexibility in destination clauses that allows buyers of U.S. LNG to
take it to any market in the world, essentially creating spot
market contracts. They are not specifically linked to an import
market as in traditional contracts with fixed destinations.
Some U.S. LNG cargoes with assumed fixed destinations,
such as contracts with GAIL to India, have been recontracted to
other companies, primarily global LNG trading companies
(such as Trafigura and Gunvor) and aggregators with large
flexible supply portfolios (Shell, TOTAL, Gas Natural Fenosa,
etc.). This will further increase the volumes of U.S. LNG traded
in the global spot markets.
Given strong demand growth in Asia and new markets
coming on line, the risk to significant underutilization of U.S.
liquefaction capacity has been reduced greatly, although some
risk does still exist. We see a fundamentally tighter global
market going forward with potentially greater demand and
higher capacity utilization.
LNG demand growth in China will account for the largest
share (about one-third) of global demand growth. China is
expected to remain the world's second largest LNG importer
after having taken the spot from South Korea in 2017. The
country increasingly will rely on LNG imports to meet growing
natural gas consumption supported by policy-driven coal-togas switching, particularly in its northern provinces. This will
affect residential/commercial, industrial and power sectors.
There are currently 40 LNG importing countries. The size of
most LNG importers is small; the combined import volume of
27 of the smallest LNG importers account for the same LNG
import volume as South Korea or China. However, these markets
have the potential to increase LNG imports substantially in
coming years.
LNG demand will continue to increase, primarily in Asia, as
existing markets (especially China and India) continue to rely
on growing LNG imports. Other countries in South and Southeast
Asia will be commissioning new import terminals in the next
few years, along with a number of smaller importers. For
74 THE AMERICAN OIL & GAS REPORTER

example, new offshore terminals that will use floating storage
and regasification units (FSRUs) are starting up this year in
Bangladesh, Panama and Gibraltar, representing new import
markets. Meanwhile, Turkey recently opened its fourth import
terminal and is bringing on line another FSRU this year, and
Pakistan also added its second FSRU last year.
One of the key points in any discussion of global LNG
markets is that the United States is poised to become the largest
global swing supplier. The global natural gas market will come
to rely on U.S. LNG because there is simply no other country
that can provide the flexibility and availability of LNG to meet
peak demand outside Europe.
EIA expects a large share (more than 50 percent) of U.S.
LNG to continue to trade in the spot markets. Asia will remain
the largest destination region for the U.S. LNG, with exports to
Mexico, Chile, Argentina, Brazil, Europe and the Middle East
also expected to continue. In total, the global LNG trade is projected to almost triple over the next two decades-climbing from
37.5 Bcf/d in 2017 to 64 Bcf/d in 2030 and 84 Bcf/d in 2040-
and overtake pipeline trade by the late 2030s. U.S. LNG exports
are projected to grow to 14.7 Bcf/d by 2030, meeting 23 percent
of total global LNG demand as natural gas consumption will
continue to grow, supported by government policies to reduce
air pollution and carbon emissions by promoting natural gas in
the energy mix.

How much U.S. natural gas production will be
Q: required
on a daily basis to support the contractual commitments of the liquefaction terminals on
line by the end of 2019? What do EIA's forecasting
models indicate about how much U.S. natural gas
supply will be available by that time, and from what
basins will the gas come to support LNG export terminals?

ZARETSKAYA: LNG exports are the major driver of domestic
natural gas demand over the next decade, similar to how electric
generation was the major driver of demand growth over the past
decade. We also see growth in pipeline exports to Mexico, providing additional demand on top of domestic markets and LNG
exports.
Increasingly, growth in demand for U.S. gas production is
shifting from domestic market sectors to export markets, which
not only is making waterborne LNG exports and Mexican
pipeline exports the main drivers for U.S. natural gas demand
going forward, but also increasing linkages between domestic
and global natural gas markets.
EIA projects that U.S. LNG exports will average 4.8 Bcf/d
on an annual basis in 2019. If all the current projects are
completed on schedule, U.S. nameplate liquefaction capacity
would reach 9.6 Bcf/d. Again, actual utilization will be lower
since it takes time for the projects to ramp to full capacity. Accordingly, EIA projects U.S. LNG exports to reach 6.2 Bcf/d
during the winter months of 2019-20. Since it takes an additional

American Oil and Gas Reporter - April 2018

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