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US LNG Continues on Growth Trajectory

Sabine Pass manages turnaround in last week of July

US LNG exports seemed set for negative growth in the fourth week of July based on vessel schedule visibility. At the time, only four additional cargo liftings had been scheduled for the United States by the end of July, which indicated LNG exports out of Sabine Pass in particular to reach only 1.57 million tonnes (mmt) for the month.

Sabine Pass’ ‘rapid-fire’ schedule

Although Sabine’s month-on-month performance did drop slightly by 3pp, a spurt in shipments by the plant in the last week of July took US LNG exports to the very top of our forecast for the month.

A ‘rapid-fire’ schedule of up to two Sabine Pass shipments per day pushed US LNG exports to 3.41mmt in July.  Steadier but nonetheless smaller day-to-day increments at Cameron LNG, Corpus Christi LNG and Cove Point LNG also helped.

US LNG capacity utilisation remains high

As our upcoming LNG Production Report will show, US LNG exports therefore kept capacity utilisation high at 97%, representing month-on-month export growth of 10% and robust year-on-year growth of 54%.

Portfolio business model guarantees business

Over the past 13 months, more than 39% of US LNG has been shipped to just three countries – South Korea, Japan and Mexico. US LNG exports to South Korea and Japan in particular are underpinned by significant capacity stakes the countries’ major buyers such as KOGAS and the JERA consortium have leased from Cheniere (Sabine Pass LNG, Corpus Christi LNG), Dominion (Cove Point LNG) and Sempra Energy (Cameron LNG). 

Mexico, meanwhile, is an energy hungry member of the USMCA (ex NAFTA), with ambitious plans to expand its domestic gas pipeline network and links to the United States. Until that plan reaches completion, though, US LNG is vital to bridge the gap.

All four US LNG plants currently in operation – as well as upcoming Freeport LNG – share a similar portfolio business model, whereby contracts are based on ‘use or pay’ for capacity instead of physical cargoes delivered to buyers. In other words, portfolio players such as BP or large utilities such as TEPCO procure raw US gas independently and merely leases gas liquefaction capacity from US LNG plant operators such as Cheniere. The produced LNG is then shipped out aboard a vessel chartered by either the capacity leaseholder or the buyer.

Set for growth: Freeport LNG may ship first commercial cargo by Saturday

Consequently, the roster of destinations for US LNG is among the most diversified, with destinations located in all three Basins. Accordingly, this bodes well for continued growth of US LNG exports, in particular since Freeport LNG is likely to load its first commercial cargo aboard the LNG Jurojin (IMO 9666998) this week. The LNG Jurojin transited the Panama Canal on Saturday last week and is currently scheduled to berth in Freeport on Thursday, our data shows.