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American gas could plug a widening global supply gap, as long as it remains affordable.
One word — diversification — was on the lips of most executives at the world’s biggest natural gas conference in Bangkok this week.
That’s the industry’s euphemism for cutting exposure to the Middle East.
After all, more than six months into the US-Iran war, there’s still no sign of liquefied natural gas flowing again through the Strait of Hormuz. A fifth of global supply remains effectively trapped inside the Persian Gulf.
Publicly, speakers at the Gastech event stressed that Qatar and the United Arab Emirates will continue to be important suppliers to the world. On the sidelines, however, another thought was whispered: What if LNG traffic through Hormuz never fully returns to normal?
Buyers and traders can no longer afford to wait, and their search for alternative supplies has put the US — already the world’s biggest exporter — front and center in the conversation.
With America set to roughly double LNG capacity by 2030, those countries most exposed to the Middle East disruption like Pakistan and Bangladesh are exploring how to secure some of this supply.
Companies in Thailand are doing the same, while Japan’s Inpex Corp. is considering investing in an export project in the US.
For buyers, American LNG offers a hedge. Cargoes can be shipped to Asia or Europe depending where they’re needed more, or where prices are higher.
The economics are also attractive. Long-term contracts linked to Henry Hub, the US benchmark, are delivering LNG to Asia at roughly $8 per million British thermal units today. The current spot price is close to $30.
But there’s a catch.
Rising construction costs, supply-chain bottlenecks and competition for fuel needed to power data centers are making US Gulf Coast export plants more expensive, a trend that’s being reflected in the price of new contracts. That matters to cash-strapped economies.
If the US and other suppliers like Canada and South America don’t seize this opportunity, buyers may simply opt to burn more coal or accelerate their shift toward renewables.
And if that happens, diversification takes on a wider meaning — not just a shift away from the Middle East, but from LNG itself.
—Stephen Stapczynski, Bloomberg News
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LNG Buyers Turn to US as Hormuz Crisis Forces Supply Rethink