Cheniere Energy, the largest U.S. exporter of liquefied natural gas, is planning a major expansion at its flagship terminal off the coast of Louisiana to capitalize on rising demand for energy overseas following Russia’s sweeping invasion of Ukraine.
The company said Thursday it will begin the permitting process to expand gas export capacity by 20 million tons per year at its Sabine Pass LNG plant, a 74 percent increase from the facility’s current 27 million tons capacity. Cheniere pioneered foreign sales of US LNG when it began exporting from Sabine Pass in 2016.
Cheniere’s ambitious growth plans are a sign of optimism in the U.S. LNG industry that the boom in demand for the fuel sparked by last year’s supply cuts to Europe by Moscow will last for decades.
“The need for further investment in LNG capacity was revealed again last year. Over the next few decades, trends on both the supply and demand sides will support new liquefaction infrastructure,” Anatol Feygin, chief commercial officer at Cheniere, said in a call with investors.
Cheniere did not provide cost estimates for the project, but at the current rate of construction, it would likely exceed $10 billion. The Houston-based company says it hopes to start exporting from the new facilities by the end of the decade and has said it could add carbon capture and storage capabilities to reduce the plant’s greenhouse gas emissions.
Feygin said Cheniere was trying to get “European and Asian buyers” for the project. Adding capacity to the existing plant would give it a cost advantage over other competing projects, he said.
U.S. natural gas prices have fallen nearly 80 percent from their highs last year, largely because a warm winter has a weakened demand for heat. Domestic gas production in the US also remains strong.
Prices traded well below the level of gas sold overseas, underscoring the attractiveness of US exports. The U.S. benchmark gas price traded at around $2.28 per million British thermal units on Thursday, compared with the main European hub price of around $16/mil. Btu.
US President Joe Biden struck a deal with European Commission President Ursula von der Leyen last year to encourage US exporters to continue supplying the continent with higher volumes of natural gas until the end of the decade.
But the Biden administration is under increasing pressure from climate activists not to grant permits for new long-term oil and gas projects that they say will lock in carbon emissions for decades to come. Cheniere will need to obtain a federal permit before proceeding with the expansion.
Cheniere’s expansion plans come on the heels of some other U.S. gas executives he warned that the recent drop in energy prices in Europe and the continent’s climate ambitions have cooled interest in new export projects.
The US has the capacity to export about 110 million tons of LNG per year, and projects currently under construction are set to cement its status as the world’s largest exporter, with a capacity of about 140 million tons by 2025.
Cheniere’s competitors, including Sempra Energy and NextDecade, already have permits and have lined up long-term customers for competing projects. They hope to make final investment decisions this year that would significantly increase capacity.
Consulting firm Wood Mackenzie says more than $100 billion could be invested in US LNG projects over the next five years.