ES #125: Imbalanced Global LNG Import/Export Capacity Growth

Energy Shots #125:

Wednesday’s Mobius Intel Brief looked at recent plans announced by four of the world’s five largest LNG importers—Japan, South Korea, India, and Taiwan— to offset trade imbalances with purchases of US LNG exports.

• TL;DR: The U.S. trade deficit in goods set new records in the final two years of the Biden administration, creating a larger ‘tariff target’ for export-centric economies as the second Trump administration establishes new trade policies. Under Trump 1.0, aggregate imports of US LNG by the four countries listed above increased by more than 232%, gaining from an average of 0.6 Bcf/d in 2017 to an average of 2.1 Bcf/d in 2020.

The incentives for export-centric economies to retain access to the U.S. consumer economy are clear. Total exports to the United States account for a meaningful share of annual GDP for these countries:

• South Korea: 7.28%

• Japan: 3.4%

• India: 2.14%

• China: 2.82%

• Germany: 3.9%

Meanwhile, a closer look at the balance of global LNG infrastructure growth over the next five years shows that near-term negotiations to capture and cement market share in large LNG importing countries will become increasingly consequential for domestic energy markets as well.

The Balance of Global LNG Export/Import Capacity Growth

Approximately 25.5 Bcf/d of LNG export capacity is currently under construction and expected to reach operational status between 2025-2027.

• The United States leads global LNG export capacity under construction with 10 Bcf/d, followed by growth from Qatar’s North Field Expansion project that will add 6.5 Bcf/d by 2027.

Proposed projects could add another 114 Bcf/d of LNG export capacity before 2030—led by the United States’ 36.7 Bcf/d and followed by Russia’s 34.1 Bcf/d—pending final investment and regulatory decisions.

While only a subset of proposed LNG export projects will reach operational status, global LNG export capacity could grow by as much as 140 Bcf/d by the end of the decade.

Conversely, the latest tally of global LNG import projects currently under development shows 1) Asia’s dominating share of demand growth and 2) material risks for a supply overhang that invites fierce competition amongst LNG exporters.

Asia accounts for approximately 25 Bcf/d (75%) of the ~33 Bcf/d of global LNG import capacity currently under construction and is distantly trailed by 6.4 Bcf/d of projects under construction in Europe.

Within Asia, China continues to lead regional import growth:

• China: 16.1 Bcf/d

• India: 3.74 Bcf/d

• South Korea: 2.91 Bcf/d

• Taiwan: 1.2 Bcf/d

• Philippines: 1 Bcf/d

Similarly, Asia dominates global LNG import capacity growth from proposed projects planned to come online by the end of the decade, accounting for 35 Bcf/d (63%) of a total 56 Bcf/d in pre-construction planning phases. While Europe’s proposed capacity is less than half of Asia’s, plans for another 14 Bcf/d by 2030 reflects the continent’s increased reliance on LNG imports in the post-Russian pipeline era.

Again, China leads Asia’s proposed import capacity growth with 14.8 Bcf/d in pre-construction planning phases. India trails with 6.0 Bcf/d and Taiwan follows in third with 3.3 Bcf/d.

Takeaways

While global LNG export capacity could grow by as much as 140 Bcf/d by year-end 2030, LNG import capacity growth from proposed facilities and projects currently under construction amounts to an aggregate 89 Bcf/d by the end of the decade.

Consequently, near-term trade negotiations between the U.S. and major exporters in Asia and Europe could materially shape U.S. LNG export market share over the next half-decade ahead of intensifying supply-side competition.

Still, there are several confounding variables for stakeholders to consider that are inadequately reflected in the latest snapshot of global import/export infrastructure development, including:

• Demand-side growth from reduced regulatory barriers to in power generation and transportation sectors

• Novel or emerging technologies that replace conventional petroleum-derived fuels with natural gas (LNG-powered commercial trucking/shipping)

• Novel or emerging technologies that meaningfully expedite the time between project proposal, construction, and full operations for infrastructure like 1) LNG regassification/storage, and 2) electricity generation.

Please reach out to the Mobius team to discuss global supply/demand growth trends and portfolio-specific downstream opportunities in detail.

See you next Sunday.

ES.

This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation concerning the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is intended for Mobius clients only and is not considered promotional material.