Short-Term Energy Outlook Supplement: U.S. LNG Imports - The Next Wave
January 11, 2007
Overview
- This supplement to the Energy Information Administration’s (EIA) January 2007 Short‐Term Energy Outlook (STEO) focuses on recent trends in global and U.S. liquefied natural gas (LNG) trade and presents factors expected to influence U.S. LNG imports through 2008.
- After substantial increases early this decade (including more than doubling between 2002 and 2003), the volume of LNG imports has decreased over the past 2 years. LNG still accounts for less than three percent of total U.S. natural gas supplies, but the global market is growing, and EIA foresees another wave of U.S. LNG import growth over the next 2 years.
- EIA expects a revitalization of U.S. LNG imports during 2007 and 2008 with significant increases in year‐over‐year change. EIA’s LNG import forecast is based in part on supply expansion in the global market over the coming years, including exports from up to 3 new source countries (Equatorial Guinea, Norway, and Yemen).
- Recent competition from buyers in Western Europe and Asia for LNG cargoes has resulted in LNG prices exceeding the corresponding natural gas market price in the United States. During periods of high global LNG demand and rising prices, LNG cargoes will continue to be diverted to countries that are more willing to pay the highest prices. However, increasing global LNG supplies will ease price pressure in the world market over time, and as a result the United States will likely attract a greater share of available LNG cargoes.
- Price competition in both the Atlantic and Pacific Basins, particularly from the Atlantic Basin’s United Kingdom and Spain, has recently limited spot shipments of LNG to the United States. However, these markets are not experiencing the turmoil of the previous year’s severe winter, and prices are expected to ease in the coming months.
- As liquefaction capacity expands and LNG production increases globally, world supplies will grow, and competition among LNG consuming markets should soften. Under these circumstances, EIA’s outlook is for LNG import potential to the United States to remain strong in the near term.