US LNG producer Cheniere Energy is expecting strong demand for several years and is seeing increasing appetite for long and mid-term supply contracts.
In a second-quarter results briefing, Cheniere executive vice president and chief commercial officer Anatol Feygin said US LNG production is up 43% in the first half of this year, at about 35m tonnes.
He said US volumes to Asia — which require longer haul shipping — increased over 10% in the first half of 2021 to 48% of total US exports, with demand exceeding supply in the second quarter and long-term and mid-term commitments accelerating as a result.
Feygin said: “We continue to see a fundamentally tight market over the next several years breaking the trend for seasonal demand norms, even with rebounding LNG supply.”
Emissions focus
Cheniere president and chief executive Jack Fusco said LNG market fundamentals remain “constructive” and the company is seeing the return of long-term LNG contracts.
He said spot earnings have doubled and the company has been able to capitalise on this.
To coincide with its results, Cheniere published a peer-reviewed LNG life-cycle assessment study of greenhouse gas emissions of its supply chain from production through to shipping which the company said is the first of its kind.
Cheniere said using specific data provides an improved methodology for GHG emissions and estimates a lower intensity for them relative to other studies relating to US LNG.
Fusco said this will be the foundational analytical tool to estimate GHG emissions to be included in Cheniere’s upcoming Cargo Emissions Tags.
Feygin said: “We are highly confident that we have a low-profile emissions product,” and highlighted that an example in the study shows Cheniere’s LNG reduces emissions by about 50% when replacing coal in China.
Fusco said Cheniere is hoping to lead the industry to ensure that its LNG is viewed as a sustainable source of cleaner energy for the world.
Feygin highlighted that buyers and sellers are becoming more focused on emissions with an increasing appetite for carbon-neutral LNG cargoes.
He said the market has seen 12 of these so far in 2021.
Record cargo haul
Cheniere reported a $329m second-quarter loss, a turnaround on a net profit of $197m in the same period of 2020. The company blamed the red ink on the “unfavourable impact” from commodity, foreign exchanges and interest-rate derivatives and the fallout from cargo cancellations seen last year.
It said this was partially offset by increased volumes and margins from LNG sold, favourable income-tax benefit and decreased interest expenses.
In the six months to 30 June 2021, it said higher than normal contribution from LNG and natural gas portfolio optimisation activities due to significant volatility in LNG and natural gas markets further offset the loss.
During the second quarter, Cheniere boosted is revenues by 26% to $3bn from $2.4bn in the same period last year.
The number of cargoes exported by the company rose 78% to a record 139, up from 78 in the same three months of 2020. Fusco said 45% of these went to Asia and 35% Europe, with South Korea and China accounting for a quarter of all deliveries.
Cheniere said that in the year to date, it has signed fixed-fee LNG sales agreements with “multiple counterparties” for volumes from its production totalling 12m tonnes of LNG which will be delivered between 2021 and 2032.
The company said that as of 31 July it has produced, loaded and exported 1,675 cargoes totalling 115m tonnes of LNG from its two plants.
More product planned
At its Sabine Pass LNG facility, Cheniere operates five liquefaction trains and is building a sixth which is nearly 90% complete under an accelerated schedule.
The company has three trains producing 15 million tonnes per annum (mtpa) in operation at its Corpus Christi LNG plant.
Cheniere plans to expand Corpus Christi with up to seven midscale trains capable of producing a further 10 mtpa of LNG which will use shared facilities with the main plant to improve its cost competitiveness.
The company expects to sanction this project in 2022 but will be disciplined on its investment decisions.
Cheniere has also acquired 500 acres next to this site for further development.
