The emergence of the US as a major exporter has rapidly transformed the way the global LNG industry operates, but its economic success will not come without challenges, first and foremost from a potential bottleneck at the Panama Canal.
In just a matter of years, American shale gas exports have loosened the grip of traditional exporters and restrictive long-term contracts.
The impact has been particularly strong in the Asian markets, the epicenter of the traditional LNG business model, based on destination-restricted, oil-indexed, longterm contracts, and by far, the largest recipient of US LNG volumes since exports began in February 2016.
The ramp-up in US LNG exports has only just begun. By 2020, volumes are forecast to more than quadruple from around 14.4 million mt in 2017 to 62 million mt, after the completion of Elba Liquefaction Project, Freeport LNG, Cameron LNG and Corpus Christi LNG.
Significant surplus gas production, increasingly competitive E&P techniques, rising oil prices and export-favorable policies at home are likely to support growth in the US LNG industry, with eleven LNG export projects approved by the US Department of Energy and 16 others proposed so far.
These projects, however, come with their own set of challenges, and their success depends on four key factors: cost competitiveness, midstream optionality, commodity price spreads and potential constraints in the Panama Canal, a major threat to US LNG global expansion.