Gas gap in Europe drives U.S. LNG exports to record high

By Marcy de Luna and Nina Chestney

HOUSTON/LONDON (Reuters) – Sky-high European demand drove U.S. liquefied natural gas (LNG) exports to a record in December, Refinitiv data showed, with winter supply worries set to sustain orders for the fuel.

About half of the record U.S. LNG volumes shipped last month went to Europe, up from 37% earlier in 2021, data from Refinitiv and the U.S. Energy Information Administration showed.

The gains reflected soaring demand for the home heating and industrial fuel that pushed prices in Europe and Asia to record highs. The United States has ample and cheap supplies as its shale oil and gas boom in the last two decades led to domestic production that has exceeded U.S. demand by about 10%.

Vessel tracking data showed about 7.15 million tonnes of LNG were shipped last month on 106 vessels, up 16% compared to 6.14 million tonnes on 89 vessels the same month a year ago. That topped the previous record of 6.51 million tonnes set in May.

Dutch gas prices, the European benchmark, have cooled since late December removing their premium to Asia. On Wednesday, the Japan Korea Marker (JKM) price for Asia spot gas was $34.19 per million British thermal units, a premium of about $4 to Europe.

Two LNG cargoes originally destined for Europe have been re-routed this month, people familiar with the matter said, with one heading to Asia. That is a reversal to late last year when at least 10 cargoes heading for Asia were re-routed to Europe attracted by the price differential.

“LNG diversions from Asia are a useful stop-gap measure but are not a sustainable substitute for stable pipeline supplies,” Wei Xiong, senior analyst at consultancy Rystad Energy, said.

LNG demand in Asia may jump in January, halting further diversions to Europe, she added.

“Prices are volatile right now,” said Reid I’Anson, senior commodity analyst at data provider Kpler.

While LNG prices being higher in Asia than in Europe lowers the likelihood of a new record for U.S. exports to Europe, flows could shift again if temperatures tumble there, I’Anson said.

Ports in Britain, the Netherlands and Belgium have around 30 LNG tankers scheduled for delivery this month, with at least 13 arriving from the United States. [LNG/TKUK]

Chilling

While the United States has plentiful natural gas, its processing and chilling capacity is limited. Gas flowing to U.S. LNG export plants in December hit a record 12.2 billion cubic feet per day, about the maximum processing capacity.

There were no LNG processing plants approved in the United States last year, while nearly a dozen plants proposed in past years are still awaiting financial commitments.

Spending on new LNG projects fell in recent years as trade tensions between the United States and China rose and more recently as gas prices fell during the COVID-19 pandemic.

(The story has been refiled to fix typo in second paragraph)

(Reporting by Marcy de Luna in Houston and Nina Chestney in London; Additional reporting by Susanna Twidale; Editing by Alexander Smith)