222
rent crisis, policy experts and former US officials have cautioned against making a
utility into a political issue, as purchasing is essentially a business decision. While
the effects of the pandemic on the LNG market are still yet to be fully seen, an
extended downturn in demand could shift the global market and highlight the risks
of politicizing the commodity. The EU has become an important destination for US
LNG “because of an accident of where the market ended up, not by design,” CSIS’s
Tsafos told Clean Energy Wire. Europe has become a home to US gas because of its
storage and regasification capacity; it can be considered a “dumping ground for
excess LNG,” he added. Juncker and Trump had little influence. “It was perfect timing, but not something that either of them did.” Tsafos warned that the market could
switch again if conditions were to change (www.cleanenergywire.org 2020).
So far this year, the US has seen over 100 cargo loads of LNG canceled by buyers
around the globe as prices fell to record lows in Europe and Asia due to dwindling
demand stemming from the impact of the global Covid-19 pandemic. Simultaneously
winters in Europe and Asia saw above-average temperatures leading to reduced
demand and greater storage by utilities companies in those regions. Stockpiles in
Europe and the US are now predicted to reach their highest levels since records
began following the summer injection season. The amount of pipeline gas flowing
to US LNG plants averaged 4.0 billion bcf/day (41% utilization) by mid-August,
according to Refinitiv, putting LNG exports on target for their first monthly increase
since hitting their record level in February. Utilization was about 90% in 2019
(www.reuters.com 2020a, b, c, d, e, f, g, h, i).
Earlier in 2020, the international oil industry was impacted by the onset of
Covid-19. Currently, the supering global economy is impacting the liquefied natural
gas (LNG) industry in a similar manner. Like oil previously, prices of spot LNG
around the world are collapsing, storage is rising, and LNG exporters are responding to mounting challenges. This combination of factors is bad news for the US
LNG export business. In reaction to the glut of LNG, dominant exporters—Qatar
and Russia—are amping up their own mega-projects to lock in market share for the
next decade and beyond. Actions by Russia and Qatar could have long-lasting
impacts on the US export LNG industry. Forty US LNG cargo loads scheduled for
August 2020 were canceled pushing the total cargo cancelations for the summer
over 100, bringing total US LNG exports to half capacity (www.spglobal.com
2020a, b, c, d, e).
The limited sales of US LNG to China as part of the January 2020 US–China
trade deal will do little to block rising exports from Qatar and Russia impacting
future financing. Figures from the US Department of Energy state that China
imported 21.1 Bcf of US LNG during the month of April 2020, after Beijing started
granting tax waivers to some importers. This however did not last. Exports to China
were reduced to two ships, one in June and one in July. For the time being, China
appears to be buying from alternative sources preferring imports from cheaper LNG
spots. Chinese interest in spot LNG is growing due to demand from independent
Chinese buyers such as ENN Energy Holdings Limited and Jovo Energy Co., who
have access to terminals (www.cfr.org 2020a, b, c). As a cost-cutting measure, these
independent companies are taking as little as possible under their long-range gas
agreements, in effect, exercising downward quantity tolerances (DQT) of their off6 Trump Energy Diplomacy
rent crisis, policy experts and former US officials have cautioned against making a
utility into a political issue, as purchasing is essentially a business decision. While
the effects of the pandemic on the LNG market are still yet to be fully seen, an
extended downturn in demand could shift the global market and highlight the risks
of politicizing the commodity. The EU has become an important destination for US
LNG “because of an accident of where the market ended up, not by design,” CSIS’s
Tsafos told Clean Energy Wire. Europe has become a home to US gas because of its
storage and regasification capacity; it can be considered a “dumping ground for
excess LNG,” he added. Juncker and Trump had little influence. “It was perfect timing, but not something that either of them did.” Tsafos warned that the market could
switch again if conditions were to change (www.cleanenergywire.org 2020).
So far this year, the US has seen over 100 cargo loads of LNG canceled by buyers
around the globe as prices fell to record lows in Europe and Asia due to dwindling
demand stemming from the impact of the global Covid-19 pandemic. Simultaneously
winters in Europe and Asia saw above-average temperatures leading to reduced
demand and greater storage by utilities companies in those regions. Stockpiles in
Europe and the US are now predicted to reach their highest levels since records
began following the summer injection season. The amount of pipeline gas flowing
to US LNG plants averaged 4.0 billion bcf/day (41% utilization) by mid-August,
according to Refinitiv, putting LNG exports on target for their first monthly increase
since hitting their record level in February. Utilization was about 90% in 2019
(www.reuters.com 2020a, b, c, d, e, f, g, h, i).
Earlier in 2020, the international oil industry was impacted by the onset of
Covid-19. Currently, the supering global economy is impacting the liquefied natural
gas (LNG) industry in a similar manner. Like oil previously, prices of spot LNG
around the world are collapsing, storage is rising, and LNG exporters are responding to mounting challenges. This combination of factors is bad news for the US
LNG export business. In reaction to the glut of LNG, dominant exporters—Qatar
and Russia—are amping up their own mega-projects to lock in market share for the
next decade and beyond. Actions by Russia and Qatar could have long-lasting
impacts on the US export LNG industry. Forty US LNG cargo loads scheduled for
August 2020 were canceled pushing the total cargo cancelations for the summer
over 100, bringing total US LNG exports to half capacity (www.spglobal.com
2020a, b, c, d, e).
The limited sales of US LNG to China as part of the January 2020 US–China
trade deal will do little to block rising exports from Qatar and Russia impacting
future financing. Figures from the US Department of Energy state that China
imported 21.1 Bcf of US LNG during the month of April 2020, after Beijing started
granting tax waivers to some importers. This however did not last. Exports to China
were reduced to two ships, one in June and one in July. For the time being, China
appears to be buying from alternative sources preferring imports from cheaper LNG
spots. Chinese interest in spot LNG is growing due to demand from independent
Chinese buyers such as ENN Energy Holdings Limited and Jovo Energy Co., who
have access to terminals (www.cfr.org 2020a, b, c). As a cost-cutting measure, these
independent companies are taking as little as possible under their long-range gas
agreements, in effect, exercising downward quantity tolerances (DQT) of their off6 Trump Energy Diplomacy