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U.S., Australia can do little to replace lost Qatari LNG cargoes

According to industry analysts and calculations, the United States and Australia are two of the largest global producers of liquefied gas. They have limited spare capacity to compensate for the loss in supply after Qatar stopped production and declared force majeure due to the conflict in the Middle East. Qatar, which supplies 20% of all LNG in the world, has stopped its production because it cannot send super-chilled LNG through the Strait of Hormuz. Iran has threatened to fire at any vessel attempting to cross the Strait of Hormuz. A vessel was damaged on Wednesday by a projectile as it approached the shipping chokepoint near the Middle East Gulf. The U.S. has the largest LNG production in the world, but it is running at near-full speed and its cargoes are locked into long term contracts. The new U.S. LNG production that is expected to come online in the near future will likely not exceed 2 billion cubic foot per day. This would be far below the gap of 10 bcfd left by Qatar, which would equal to about 80 million tonnes per year.

Alex Munton is the director of Global Gas and LNG for Rapidan Energy Group.

The Dutch TTF benchmark dropped to $16.72 per milliBtu, after reaching a high of nearly $19 per milliBtu in the past three years on Tuesday.

VENTURE FLEXIBILITY

Venture Global, the second-largest U.S. manufacturer, has the greatest flexibility in helping in the short term. It can sell the cargoes it produces on the spot markets as it brings online a Louisiana plant.

Venture Global sells 2 million metric tonnes per month on the spot market in Louisiana from its Plaquemines facility. This 'gives us more space to redirect cargoes', CEO Mike Sabel said on Monday during a earnings call.

Plaquemines awaits final approval from the U.S. Department of Energy to expand beyond its current approved volume of 27,2 million tons per annum. Venture Global's output could increase by up to 7 million tons annually if the Department of Energy approves it quickly. However, this would only be a fraction compared to what Qatar has lost. Poten & Partners, a shipping firm, said Tuesday that Venture Global accounted more than half of 80 LNG cargoes sent from the U.S. into the Middle East in the past year.

Venture Global declines to comment further.

Golden Pass LNG, a joint venture of QatarEnergy and Exxon Mobil, is another new U.S. source. Initial production at a train capable of producing 6 million tons annually should begin this month. Golden Pass did not immediately answer a question on whether Qatar could use this to make up for its shortfalls.

Last week, leading U.S. energy exporter Cheniere Energy began production at Corpus Christi from?Train 5. It is expected that the unit, which has a capacity of 1.5 million tons annually, will take approximately a month to reach full production. The majority of this volume has already been contracted.

Cheniere said it would monitor developments in the Middle East, and deliver on its customer commitments.

US, AUSTRALIA, AND QATAR ARE LEADERS IN GLOBAL GAS

Energy analysts estimate that the global gas consumption is 400 billion cubic feet per day. According to the International Gas Union, approximately 55 bcfd is traded as LNG. The U.S.A., Australia, and Qatar account for about 60% of the global output. The majority of this LNG is sold on long-term contracts.

Qatar sold LNG to Europe and Asia before it halted production. Australia, which ships 11 bcfd of LNG, has a limited number of spot cargoes that can?plug the gap in Asia's supply.

There is little if any?room for a further increase in LNG production from Australia, as the plants are running at full capacity. Saul Kavonic, analyst at MST Marquee, said that some LNG plant maintenance could possibly be delayed to squeeze out three million tons of LNG over the next six month. The flow capacity of smaller producers is also limited. LSEG data show that LNG Canada is capable of producing up to 2 bcfd but currently produces about 1.5 bcfd.

(source: Reuters)