In 2023, the U.S. LNG sector achieved significant expansion, with three key projects moving into the construction phase, a testament to the industry's robustness despite a 52% decline in contracted volumes from the previous year. These developments were underpinned by crucial sale and purchase agreements (SPAs) that laid out the terms for nearly 22 million metric tons of LNG annually, equivalent to around 3 billion cubic feet per day of natural gas, according to EIA.
This activity underscores the strategic importance and growing capacity of the U.S. LNG in the global energy market.
Notable among these advancements were the commencement of major projects across the U.S. Venture Global initiated the second phase of its Plaquemines project in Louisiana, while Texas saw the beginning of Sempra's Port Arthur project and Next Decade's Rio Grande project, with operational timelines stretching from late 2024 to 2027. These projects signify a significant expansion in the U.S. LNG export capacity, reinforcing the country's position as a key player in the global LNG trade.
The SPAs signed in 2023, covering nine projects, reflect the industry's standard practices, with the majority spanning 20-year terms and 94% sold on a free-on-board (FOB) basis. This means buyers take ownership of the LNG at the loading terminal, a practice that offers flexibility and aligns with global trading norms. Interestingly, there was a shift in pricing mechanisms, with just over half of the SPAs indexed to the Henry Hub natural gas price, indicating a diversification in pricing strategies compared to previous years.
The global reach of U.S. LNG is evident in the geographical distribution of the 2023 contracted volumes, which were nearly evenly split between European and Asian offtakers. This balance highlights the strategic flexibility and appeal of U.S. LNG across major energy markets. Moreover, most SPAs feature destination flexibility, allowing LNG to be delivered to any location compliant with DOE export authorizations and U.S. law, underscoring the adaptability and global orientation of the U.S. LNG export model.
Despite the backdrop of regulatory reviews and the DOE's pause on new LNG export permits to non-free trade agreement countries, the projects that achieved FID in 2023 had already secured necessary approvals, ensuring their progression. This development, coupled with the ongoing consideration of approved projects yet to reach FID, points to a cautious yet forward-moving trajectory in the U.S. LNG export landscape, poised for further growth and integration into the global energy matrix.
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