Europe gas crisis: LNG exports surge – which stocks are profiting?
19:02, 24 August 2022
Investment in new liquified natural gas (LNG) infrastructure is set to surge to $42bn annually by 2024 as the Europe gas crisis intensifies – good news for the companies involved with exporting it.
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Rystad Energy research highlighted that the figure is 200 times the amount invested in 2020, when just $2bn was put into LNG developments.
However, after 2024, the group said LNG investment is expected to drop substantially as governments transition away from fossil fuels and choose low-carbon options instead.
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Bullish outlook on natural gas demand
“Recent price surges in natural gas markets worldwide have somewhat constrained gas demand, triggering a resurgence of coal-fired power generation in many countries. However, governments remain bullish on gas as an affordable, transition fuel for power in the coming years as demonstrated by the rapid growth in LNG infrastructure investments,” Palzor Shenga, vice president of analysis with Rystad Energy, said in a press release.
Therefore, in the meantime, it spells good news for the companies developing LNG infrastructure.
Where the LNG is coming from
The rising natural gas demand is a result of Russia’s invasion of Ukraine in February, which subsequently led to sanctions and restrictions on Moscow’s gas exports – which were heavily relied upon by many European countries.
The US is the top exporter of LNG with many new developments underway.
“US LNG exports have averaged roughly 324 million cu m/d, this year-to-date, a roughly 58 million cu m/d (18%) increase over last year. Contracting for US capacity has also increased, with nearly 50 million tons of agreements made this year so far, up nearly 24 million tons from the full year of 2021,” Ross Wyeno, lead analyst, Americas LNG, S&P Global Commodity Insights, told Capital.com.
LNG stocks that could benefit
The projects in development in the US include the $10bn Golden Pass LNG project in Texas, a joint venture between QatarEnergy and ExxonMobil (XOM). It is expected to start production by 2024, adding export capabilities to the Sabine Pass LNG terminal totaling around 18 million tonnes per annum (Mtpa).
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“Venture Global’s Plaquemines LNG in Louisiana – a $13.2 billion development sanctioned earlier this year is expected to produce about 24 Mtpa and start up in 2025,” Rystad Energy noted.
Cheniere Energy Inc (LNG) has also signed a deal with Chinese state giant PetroChina to supply around 1.8 Mtpa of LNG from its Corpus Christi LNG facility, with deliveries from 2026 to 2050.
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Qatar is also a major LNG producer and is aiming to boost its export capacity to 126 Mtpa by 2027 from a current 77 Mtpa, Rystad said.
Energy giants ExxonMobil (XOM), Shell (RDSB), TotalEnergies (TTEF), Eni SPA (ENI) and ConocoPhillips will join state-owned QatarEnergy for its North Field East expansion project, which is set to raise capacity to 110 Mtpa.
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Moreover, in Africa, Mozambique will see its first LNG production by the end of 2022 via the under-development, Eni-operated Area 4 (Coral South) LNG project.
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“The project will provide around 150 million cubic feet per day (MMcfd) of gas to the domestic market,” Rystad Energy added.
Two export plants are also under construction in Canada – and two in Mexico that will add another 20.8 Mtpa to North America’s LNG production. However, it will be a long wait until these facilities are in service.
“Given the situation between Europe and Russia it is likely that US LNG will continue to be in demand. Russia has warned the gas prices may rise another 60% as Gazprom’s own production and exports continue to fall. Such developments will force Europe to further shift to LNG. US exports to the EU have already risen as the country exported three quarters of its LNG to Europe, a big jump from one third last year. US companies will continue to benefit from this geopolitical risk premium,” Osama Rizvi, energy analyst at Primary Vision, told Capital.com.
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