US gas exporter Cheniere bets on robust demand with expansion plan

Cheniere Energy, the largest US liquefied natural gas exporter, is planning a major expansion of its flagship terminal on the Louisiana coast as it seeks to capitalize on rising overseas energy demand in the wake of Russia’s full-scale invasion of Ukraine.

The company said Thursday it will begin the process of issuing permits to add 20 million tons of gas per year at its Sabine Pass LNG plant, up 74 percent from the facility’s current capacity of 27 million tons. Shenier pioneered US LNG overseas sales, starting exports from the Sabin Pass in 2016.

Cheniere’s ambitious growth plans are a sign of US optimism LNG industry that the boom in fuel demand, driven by Moscow’s cuts in supplies to Europe last year, will persist for decades.

“The need for further investment in LNG capacity resurfaced last year. Over the next few decades, trends on both the supply and demand sides will support the new liquefaction infrastructure,” said Anatoly Feigin, commercial director of Cheniere, by phone with investors.

Cheniere did not provide a cost estimate for the project, but at the current pace of construction, it is likely to exceed $10 billion. The Houston-based company says it hopes to start exporting from new facilities by the end of the decade, and said it could add carbon capture and storage capabilities to reduce the plant’s greenhouse gas emissions.

Feigin said that Cheniere was trying to attract “European and Asian buyers” to the project. Increasing the capacity of the existing plant will give it a cost advantage over other competing projects, he said.

US natural gas prices are down nearly 80% from last year’s highs, mainly due to warm winter weakened the demand for heat. US domestic gas production also remains high.

Prices for gas sold abroad are significantly lower, highlighting the attractiveness of US exports. The benchmark US gas price traded at about $2.28 per MMBtu on Thursday, compared to the European core of about $16 per MMBtu.

US President Joe Biden struck a deal with European Commission President Ursula von der Leyen last year to encourage US exporters to continue to ship large volumes of natural gas to the continent for the rest of the decade.

However, the Biden administration is under increasing pressure from climate activists not to issue permits for new long-term oil and gas projects that they claim will lock in carbon emissions for decades to come. Cheniere will need to obtain federal permits before proceeding with the expansion.

Cheniere’s expansion plans are in the hands of some other US gas industry executives. warned that the recent drop in European energy prices and the continent’s climate ambitions have dampened interest in new export projects.

The US has the capacity to export about 110 million tons of LNG per year, and projects currently under construction should solidify its status as the world’s largest exporter with a capacity of about 140 million tons by 2025.

Cheniere’s competitors, including Sempra Energy and NextDecade, have already secured approvals and found long-term customers for competing projects. This year they hope to make final investment decisions that will significantly increase capacity.

Consulting firm Wood Mackenzie estimates that more than $100 billion could be invested in LNG projects in the US over the next five years.

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