The U.S. liquefied natural gas (LNG) industry can deliver long-term price and political risk stability amid unstable oil prices, said Brian Lloyd, regional vice president of external affairs for Sempra Infrastructure and Sempra in a conversation with Energy Policy News.
“One of the advantages of U.S. LNG is the tremendous resource base,” Lloyd said. “The U.S. has a very diversified competitive industry that traditionally can respond very quickly to changes in prices and you can pull from a variety of basins in the U.S.”
The San Diego-based Sempra is a publicly-traded energy infrastructure company that operates utilities throughout California and Texas, and more than 4,500 miles of pipelines. The demand for LNG is apparent at the company’s Cameron LNG export facility in Louisiana, which is fully contracted for the first three trains. Another facility is under construction in Baja California in Mexico.
As Russian leaders have threatened to cut off gas supplies to Europe, the natural gas industry in the U.S. has touted the importance of increasing LNG exports. However, LNG is often under long-term contracts and the capacity is fixed until the next facility comes online, Lloyd said.
“There is a bit of a duration that’s going to come and we’re looking at how are there ways that we can help bridge cargoes with potential buyers of our next projects to get them from here to there,” he said. “But it’s going to be tough for Europe for a number of years, because the capacity is going to take some time to build.”
U.S. LNG exports averaged 10.9 billion cubic feet per day (Bcf/d) in February, down from 11.2 Bcf/d in January. Although exports fell in February, they were higher than in any month prior to December 2021, according to the Energy Information Administration’s (EIA) latest Short-Term Energy Outlook.
In Europe, where many U.S. LNG shipments are destined to end up, inventories are lower than the five-year average, and potential supply disruptions related to the war in Ukraine are a concern, EIA said.
EIA expects “high levels of U.S. LNG exports to continue in 2022, averaging 11.3 Bcf/d for the year, a 16% increase from 2021.”
In February, the Henry Hub natural gas spot price averaged $4.69 per million British thermal units (MMBtu), up from the January average of $4.38/MMBtu. Meanwhile, the natural gas spot price at the Title Transfer Facility (TTF) in the Netherlands hit a record high of $72.765/MMBtu last week, although prices started to decline this week.
“I think there’s this general sense of cooperation for everybody in the LNG industry,” Lloyd said. “These prices are not good for our ultimate consumers around the world. They’re not good for demand continuing to grow for this fuel.”
Environmental concerns
Environmental groups, such as Sierra Club, have opposed the construction of new LNG export facilities based on environmental concerns. Natural gas combustion accounted for one-third of carbon dioxide emissions from the U.S. power sector in 2018, according to Center for Climate and Energy Solutions.
The U.S. has substantially decreased greenhouse gas emissions compared with other parts of the world, Lloyd said. Carbon monoxide emissions from fossil fuel combustion in the U.S. fell by 8.4% between 1990 and 2020, according to the U.S. Environmental Protection Agency (EPA).
Despite decreasing its emissions, the U.S. is still the world’s second-largest emitter, followed by India. Only China emits more. However, emissions from China and India increased 25.4% and 36.6% respectively between 2010 and 2019, according to the Rhodium Group research firm.
“We’re the country in the world that has reduced CO2 emissions more than anybody else without a national goal, and that’s just because we’ve allowed the market to drive these investments,” Lloyd said. “We view LNG as exporting the world’s most proven greenhouse gas mitigation strategy to the world.
“I think our view with the environmental crowd is we don’t disagree with the goal,” he said. “We think their policy prescriptions are inherently flawed and can’t get you there as fast as the world needs to.”
FERC policies
New infrastructure is needed in the U.S. to facilitate the transportation of LNG, and regulatory uncertainty risks hampering those efforts, Lloyd said. The Federal Energy Regulatory Commission’s (FERC) to its pipeline certification policies has been met with skepticism from the natural gas industry.
But the policies have also received praise from environmental justice organizations and other stakeholders saying that FERC is moving toward a much more robust show of need for pipeline developers.
Under the new policies, FERC requires pipeline companies to comply with stricter environmental codes.
Lloyd acknowledged that FERC is trying to prevent certificates from being rejected in courts due to inadequate environmental review. However, the policy adds uncertainty, he argued. Sempra has proposed a new electric compressor station with carbon sequestration tied in for the Louisiana facility. But even though Sempra would add the station to an already permitted project, Lloyd said the company does not know how FERC will apply the policy statement to the proposal.
“Let’s not lose sight of the fact that if we don’t build infrastructure here, we don’t do LNG exports here,” he said. “Or if we don’t build natural gas infrastructure to move it to new gas power plants to support renewables, the consequences of that are that coal plants will stay on longer and they have even greater emissions.”
