An uptick in LNG contract activity spurred by high global natural gas prices has bolstered the prospects of export projects getting commercially sanctioned over the coming year, according to a Goldman Sachs forecast.

Goldman Sachs commodity analysts flagged Cheniere Energy Inc.'s anticipated midscale expansion of its Corpus Christi LNG facility in Texas and Venture Global LNG's proposed Plaquemines LNG terminal in Louisiana as projects that they expect to advance to construction. Both LNG developers have announced signing long-term supply deals tied to their projects in recent months as they work to secure sufficient commercial support to underpin financing.

Goldman also cited the Baltic LNG project, which broke ground in Russia earlier in 2021, as a new source of capacity expected to come online by the mid-decade.

"The strong global gas prices seen this year have incentivized several new long-term contracts, increasing the likelihood that additional liquefaction projects reach [final investment decisions] over the next year," Goldman analysts led by Samantha Dart said in a Nov. 14 note to clients. "The timeline for these projects reinforces our view that global LNG markets will remain in a bullish cycle until 2025, when the next wave of supply projects starts."

Global gas prices

U.S. exporter developers have argued that the high global gas prices, driven by a supply crunch abroad, show a need for buyers to secure LNG supplies under long-term contracts and demonstrate sufficient demand for new export facilities. The tight global LNG market has incentivized the six major LNG export facilities operating in the U.S. to run their facilities at close to full capacity for months, with a large spread between U.S. Henry Hub gas prices and prices in end-user markets in Asia and Europe.

Total feedgas deliveries to the U.S. LNG export facilities were about 11 Bcf/d on Nov. 14, according to S&P Global Market Intelligence pipeline flow data. That compared to around 10 Bcf/d in feedgas flows to U.S. terminals in November 2020 as sector activity rebounded from the impacts of the pandemic.

The European benchmark Dutch Title Transfer Facility day-ahead contract reached an all-time high of $39.51/MMBtu on Oct. 5, while the S&P Global Platts Japan Korea Marker spot Asian LNG price hit a record high of $56.33/MMBtu on Oct. 6. Prices have fallen since then, but they remain several times higher than prices in the U.S. and continue to encourage U.S. LNG exports.

Strong gas demand has led to a competition for supplies in recent months between buyers in Asia and in Europe, where a shortage of gas supplies is a key factor in the region's energy crisis. Goldman forecast that this would taper off, estimating a $5 rise in the European benchmark price to $30/MMBtu while the spot Asian LNG price remains at about $32/MMBtu. The analysts said such a price in Europe would help balance the market amid a shortfall in supplies from Russia. In Asia, the analysts said they modestly lowered their projection for expected winter LNG demand primarily because of slowing industrial gas demand in China related to power shortages.

US LNG projects

Goldman also raised its forecast for U.S. winter feedgas demand by 0.7 Bcf/d to 11.5 Bcf/d, saying it expected facilities under construction to ramp up more quickly in early 2022 than previously expected. These facilities include a sixth liquefaction train at Cheniere's flagship Sabine Pass LNG terminal in Louisiana, and Venture Global's Calcasieu Pass LNG export facility in southwest Louisiana, which will have an export capacity of about 10 Mt/y. Both facilities are in the commissioning process and could begin producing LNG by the end of the year. Goldman also raised its full-year 2022 projection for U.S. LNG exports by 5 Mt to a total of 82 Mt for the year.

Cheniere's Stage 3 expansion at Corpus Christi would add 10 Mt/y of capacity at the Texas export terminal. The biggest LNG exporter in the U.S. said Nov. 4 that the dramatic swings in global natural gas prices have created enough urgency among world buyers for the company to secure about 3 Mt/y worth of long-term supply contracts that it needs to feel comfortable for a final investment decision on the expansion in 2022. The company signed recent supply deals with units of China's ENN Natural Gas Co. Ltd. and Swiss Commodity trader Glencore PLC.

Venture Global's Plaquemines LNG would be built in two phases and have an LNG production capacity of up to 20 Mt/y. Venture Global said in October that it had signed a pair of long-term off-take contracts with China's Sinopec for a total of 4 Mt/y of LNG tied to the Plaquemines LNG project. The deal with Sinopec, which is formally known as China Petroleum & Chemical Corp., represented by far the largest contracted volume for U.S. LNG agreed to by a single Chinese entity.

S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.