A cold winter in China could be signaling a hotter market for a new wave of U.S. natural gas exports sooner than expected.
Cheniere Energy CEO Jack Fusco said Chinese demand for liquefied natural gas was up 40 percent year-over-year and should continue to be strong. He said the growth in demand is about the size of Cheniere.
"As we saw this winter, demand in Asia and China kind of surprised the market. What we saw was supposed to be a market that might not be hitting supply-demand balance until the mid-2020s," said Kevin Brown, research analyst at Tortoise Capital Advisors. "It's at a place now where we see the balance coming maybe earlier, in the 2020s, pushing people to have to make that second wave of LNG investment."
Since Cheniere's first LNG shipment went to Brazil two years ago, there's an even split between destinations in Latin America and Asia, and then the rest of the world. But every spare drop went to China recently, Fusco told the CERAWeek annual energy conference hosted by IHS Markit in Houston this week.
Fusco said there's secular change in China behind the demand growth. "They want — they need — cleaner air, and we see that shift longer term," he said. China's goal is to use natural gas for 10 percent of its needs by 2020, and it needs LNG to meet that demand.
The United States is a key market to provide new sources of fuel for China. Cheniere Energy last month signed the first-ever long-term deal with a Chinese state-owned energy company, a major step forward for the industry.
"In the U.S., we have a low-cost, abundant, diverse resource base with large growth that we see coming down the pipeline," Brown said. Tortoise is one of the largest shareholders in Cheniere.
Brown said the United States also has the largest infrastructure in place.
"We've have the workforce, and we've been building out these gas-processing facilities, these pipelines and all the infrastructures that's required to really support the big LNG boom that we expect to see in the second wave of LNG in the U.S.," Brown said.
The United States currently produces 76 billion cubic feet of gas, and it should grow to 90 Bcf by 2020. The United States is expected to export 3.6 billion cubic feet of gas a day in 2018, and that should grow to 10 to 12 Bcf by the early 2020s, Brown said.
"We are on the precipice of the first time I've seen in my career when we have demand-pull and supply-push happening at the same time to support almost $200 billion in infrastructure investment that's needed in the U.S.," said Meg Gentle, president and CEO of LNG company Tellurian.
She expects to see LNG demand grow by 11 percent or 12 percent.
"This means as an industry we need to bring more than 100 million tons of new liquefaction capacity to the market to meet demand by 2025," Gentle said.
She expects another 20 Bcf of production coming from the U.S., due largely to oil drilling.
"Supply in the U.S. is telling us we have to develop another 100 million tons of capacity in the U.S. for the export market," said Gentle.
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