US LNG Summer Price Floor to Europe of $4: WoodMac

The price floor for US LNG deliveries to Europe over the next few summers could be $4/mn Btu or even lower, Wood Mackenzie research director for European gas Massimo Di-Odoardo told delegates May 12 at the Flame conference in Amsterdam.

Europe is generally seen as the international ‘market of last resort’ for LNG traders, as it has so much receiving capacity and very liquid hubs.

US gas production is expected to increase by more than the rise in its domestic gas demand, said Di-Odoardo, noting there are already 2,500 US shale gas producing locations, mainly in the Haynesville, with a break-even production price of $3/mn Btu or less.

He forecast the Henry Hub price will average around $2.80/mn Btu in real terms between now and 2023 which, net of US liquefaction charges and European regas costs, could make the floor for any US LNG reaching Europe $4.50/mn Btu in 2020 – and possibly lower in the summer at $4.

US first Gulf coast LNG export terminal, Sabine Pass

(Credit: Cheniere)

His presentation did not include an estimate of how much US LNG might come to Europe, rather than generally higher-priced markets in east Asia, Latin America and the Middle East – generally seen as a function of market forces.

Also he noted there is some uncertainty associated with such price forecasting post 2021, in case new LNG project start-ups outside the US are substantially delayed.

Di-Odoardo though sees little near-term impact if the new Trump administration repeals the US Clean Air Act, as he sees 9 GW of US coal-fired power plants that have already announced their retirement – unlikely now to be reversed by their utility owners.

US gas demand from power plants and petrochemicals is expected to grow by 2bn ft³/d over the next two years, which will be more than easily covered by US production growth, he said.

Mark Smedley