Rockefeller-Funded Group Takes A Swing and Miss at U.S. LNG
The Institute for Energy Economics and Financial Analysis (IEEFA) recently published a report on a new liquefied natural gas facility near Lake Charles, LA. But the report’s claims are based on assumptions about the LNG market that are categorically unreliable and unsupported by recent data on U.S. and global LNG trends.
IEEFA, which draws its main support and funding from the Rockefeller Family Fund that continues to pour millions into climate litigation campaigns targeting oil and natural gas firms large and small. Indeed, IEEFA was originally a Rockefeller project called the Power Plant Finance Project.
For the past few years, Rockefeller has been throwing money behind “Keep It In the Ground” groups such as Greenpeace, 350.org, and “news sites” such as InsideClimate. Although it bills itself as an “independent think tank”, IEEFA fits a similar mold. Objections to IEEFA’s activist research has been well documented and soundly rebuffed on numerous projects in Canada, Australia, Puerto Rico and Guyana.
IEEFA is critical of the ability of the global LNG industry to sustain a growth path in the future, but recent data and projections show that LNG demand is on the rise as countries increase their natural gas usage to help meet aggressive climate goals.
Here are a few facts about LNG:
LNG capacity is increasing all around the world
According to the International Energy Agency, monthly gas consumption continued to increase across the world throughout the 2021 summer and exports rose to meet demand. Despite unprecedented circumstances, there was even a modest increase in global LNG trade in 2020 to 356.1 million tons (MT). Additionally, U.S. LNG export terminals have run at or near capacity most of the summer, with the United States accounting for much of the growth in global exports through May 2021. The rise in demand is forecast to continue, with U.S. LNG exports expected to grow by 340 percent and lead the world in supplying LNG by 2040.
As Vietnam’s Minister of Industry and Trade Nguyen Hong Dien recently said:
“Vietnam believes that LNG plays an important role in helping the world solve the problem of climate change.”
Currently, 892.4 million tonnes per annum (MTPA) of aspirational liquefaction capacity is in the pre-FID stage. Global liquefaction capacity would increase three-fold if all these projects materialize, although this is highly unlikely. Most of the proposed capacity is in North America (604.4 MTPA), with 351.6 MTPA located in the United States, 227.8 MTPA in Canada and 25.0 MTPA in Mexico
Different contract types can ease LNG price volatility
Experts in the LNG market have pointed to the variety of contract types that now exist to defray the risk of LNG price volatility. The presence of spot, short-term, long-term, and optional contracts aids suppliers and investors in creating predictable forecasts and managing risks throughout the supply chain.
The 2021 International Gas Union report found that “despite COVID-19 impacts on demand and supply, global LNG trade continued its upward trend in 2020 for another consecutive year of growth, reaching 356.1 MT” and “sector adjusted to great demand fluctuations with incredible agility during the year, navigating between huge drops in demand levels at the height of the pandemic lockdowns, through exceptional upward spikes of the winter deep freeze.”
Volatility will remain a feature, but U.S. LNG advantaged
LNG is far from the “once-localized commodity that was simply linked to the price of oil.” LNG’s global demand and adaptation can be attributed to some of the market volatility. Spot prices surged in the winter of early 2021 when a cold wave hit northeast Asia, boosting LNG demand for winter heating. This was in the context of tightening supply, infrastructure issues and extremely limited shipping. As capacity and export increases, these fluctuations are expected to become less severe.
The global market could see U.S. LNG gain favor for its cargo flexibility. Commenting on the realities of cargo cancellations due to oversupply concerns, Nikos Tsafos, a senior fellow at the Center for Strategic & International Studies’ Energy Security and Climate Change Program said:
“In one way, I think of cargo cancellations as a feature and not a bug. Everyone thought that this was an attractive element of U.S. LNG, that you could have that flexibility. In some ways, what you see now is U.S. LNG doing something that other projects in the world couldn’t really do.”
LNG, both domestically and abroad, is rapidly transforming power production and displacing higher carbon-emitting fuels. Sustained investment in LNG supply and degasification will usher in a new generation of energy independence and lower carbon generation for many developed and developing nations.