Sopuruchi Onwuka

The challenges faced by natural gas liquefaction and export promoters in the United States of America is set to unsettle and reorder the pattern flow to the export market as key importers begin to shop medium to long term supply deals.

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The Oracle Today reports that Liquefied Natural Gas or LNG is sold on long term basis under binding sales and purchase agreements normally reached ahead of project commissioning.

The new shake up in the global gas market presents enhanced opportunity for new liquefaction projects in Nigeria as the Nigerian National Petroleum Company (NNPC) Limited and its partners begin gas monetization projects mainly offshore Niger Delta.

It is expected that more scalable and medium size LNG projects would spring up in the country under the prevailing flare gas monetization programme where third parties are licensed to harness flare gas from active oilfields for monetization.     

The United States of America is currently world’s biggest oil and gas producer, thanks to its massive unconventional shale sources which drive response to ample demand from European buyers looking for alternatives to pipeline gas from Russia.

But the government is pulling incentives from the industry, forcing companies to scale back output as environmental concerns continue to mount against fossil fuels across the globe.

The government, The Oracle Today reports, halted approvals of new licenses for LNG export plants in the US to enable review of the industry’s potential effects on climate change, the economy and national security. But business organizations from the US, Europe and Japan have called on the Biden administration to reverse the decision.

The license review by the American government, market sources said, impact several Asian buyers who have ties to US projects. ENN Energy Holdings Limited, China Gas Holdings Limited and SK Gas Limited all have contracts with Energy Transfer LP’s Lake Charles plant in Louisiana, which is seeking an extension of an export license. A Japanese consortium has a heads of agreement with the facility. Bangladesh’s Summit Oil and Shipping Company has a heads of agreement with Commonwealth LNG. And China Gas ,  Japan’s Jera Company and Inpex Corporation have contracts with Venture Global Incorporation’s CP2 project.

The buyers now explore other export projects in countries including Qatar, Canada or Russia. Analysts calculate that the start of new plants over the next few years might result in a glut in the second half of this decade.

Jera believes that the realization of Venture Global’s CP2 project, as well as other US export plants, are important for stable supply to the world, and will be closely monitoring developments from the US government, the company said. The firm said it will also work together with public and private sectors to respond accordingly.

While the consumers aren’t proposing to break any existing contracts, some of which are binding, they are looking to have alternatives in place in case the US pause on approvals leads to major delays, said the people, who requested anonymity to discuss private deliberations.

Japan’s Trade Minister Ken Saito said Tuesday that his nation would take the necessary steps to ensure energy security amid concerns about delays to future US production. Jera Co., Japan’s biggest LNG importer, said in response to questions that even a temporary pause to new licenses for US projects could cause concerns for global energy energy security, given its importance as a supplier.