Government intervention and free markets will be necessary to grow global liquefied natural gas (LNG) demand in the next decade and provide markets for U.S. gas producers, according to industry executives.
Cheniere Energy Inc.’s Anatol Feygin, chief commercial officer of the largest U.S. LNG exporter, said at the recent Gastech Virtual Summit that the Houston operator expects Asia to continue to be the main driver for LNG demand growth. China’s government will play a major role because of its commitment to increase the use of natural gas in the energy mix to 15%, he said.
“LNG will be a key component of that as will additional pipeline supplies,” said Feygin.
Government regulations are needed to build out a nationwide pipeline grid and LNG import terminals, as well as provide third-party access to such infrastructure, he said. More price transparency will be needed to spur investment, he added.
Feygin pointed out that Cheniere is the only U.S. LNG producer with long-term supply deals with a Chinese company. China National Petroleum Corp. in February 2018 signed two deals to buy up to 1.2 million metric tons/year (mmty) through 2043. Cheniere owns the 25 mmty Sabine Pass project in Louisiana and the 15 mmty Corpus Christi facility in Texas.
Petronet LNG Ltd.’s Prabhat Singh, chair of the India state-controlled company and largest gas importer, said “there’s a part for both” government intervention and freer markets in expanding India’s pipeline gas and LNG demand.
The government will continue to play a crucial role in expanding India’s gas grid, connecting customers to local distribution lines and building more LNG regasification capacity, he said. However, more deregulation also would be necessary to provide price transparency to stimulate demand and investment.
“The market is becoming mature day by day, and therefore it is market forces which are really going to play the role,” Singh said.
India consumes about 165-170 million cubic meters/d of gas, with more than 50% of supply from imports, according to Singh. India has 16,000-17,000 kilometers (9,940-10,560 miles) of gas pipelines but it needs another 15,000 kilometers (9,320 miles) to connect all the regions. The country has about 42 mmty of regasification capacity and imports about 23-24 mmty, he said.
India also is examining imposing a unified tariff on gas, according to Singh, which could help India import more gas when it is more expensive than domestic supply.
Petronet is evaluating whether to invest $2.5 billion and buy 5 mmty from Tellurian Inc.’s proposed 27.6 mmty Driftwood LNG project in Louisiana.
Japanese deregulation efforts have recently created some gas demand uncertainty, said Tokyo Gas Co. Ltd.’s Atsunori Takeuchi, manager of LNG optimization and trading.
“Deregulation is a little bit of an agony for us,” he said. In a fully deregulated market “we cannot get government subsidies or some support.”
Japan started a deregulated gas market in 2017, which allowed Tokyo Gas to acquire more than two million electricity customers. At the same time it lost one million gas customers, he said. That has made it difficult for Tokyo Gas to invest in infrastructure such as terminals or pipelines.
Nevertheless, the company recognizes the “need to increase flexibility and the mobility of energy procurement to handle the competitive market,” Takeuchi said.
Sempra LNG CFO Faisel Khan, whose company is a subsidiary of San Diego-based Sempra Energy, said Japan’s deregulation would help the country despite some of the growing pains being felt by Tokyo Gas. The United States has seen tremendous growth in its energy markets through unbundling, he said, adding that China is undergoing a limited form of unbundling.
A mixture of governmental policies and freer markets would provide optimal growth in global gas, he said. Sempra LNG is the majority owner of the 15 mmty Cameron LNG export terminal in Louisiana. It also has proposed building the 13.5 mmty Port Arthur LNG facility in Texas and the 2.5 mmty Energia Costa Azul LNG export project in northwestern Mexico.
“The global markets that we've talked about in this panel already are becoming more integrated, not less integrated, and so the transparency in price is there in the market,” Khan said, adding that Asian prices are increasingly converging with U.S. and European gas prices.
