The boom in shale gas exploration over the past decade has left the country with more natural gas than it can use.
It will become a net energy exporter in 2020, for the first time since 1953, according to projections from the US Energy Information Administration’s Annual Energy Outlook. Natural gas is the largest contributor to this trend.
This newfound energy independence will have an impact on policies and markets around the world.
Thanks in part to the increased availability of liquefied natural gas (LNG), a 2018 International Gas Union report tipped gas to grow from 22% to 24% of the global energy mix by 2035. In doing so, it will overtake coal as the second biggest global energy source, behind oil.
LNG from the US is the single largest contributor to the growth of the global gas trade, according to the International Energy Agency (IEA).
The biggest impact of US LNG will be in aiding global economic growth, particularly in Asia, where demand is accelerating rapidly. According the IEA, China is set to become the largest LNG importer by 2024, with other emerging Asian markets also helping to drive growth.
To maximize this opportunity, a massive construction program to build a series of multibillion-dollar LNG export terminals is under way across the US. Many of these facilities are focused almost exclusively on the Asian market.
But it isn’t just Asia that will increase its consumption of US-sourced LNG.
EIA data shows the Middle East and Europe are already importing LNG from the US, and this will grow as more US export capacity becomes available.
For example, Saudi Arabia is to significantly increase its imports of natural gas for power generation, enabling a shift away from oil-fired plants and freeing up more of its oil reserves to be exported overseas.
Both Saudi Aramco and its Middle Eastern competitor Qatar Petroleum are also investing in gas export terminals in the US.
And in Europe, US LNG could introduce more competition into the market. With North Sea gas reserves continuing to dwindle, European nations are looking to diversify their suppliers to avoid becoming reliant on a single region for sourcing gas supplies. The IEA expects the growing gas deficit in Europe to be bridged by both LNG and pipeline imports from a number of sources.
The IEA’s Gas 2019 report shows demand continues to rise: 2018’s increase was the fastest since 2010. Gas represented 45% of the total increase in primary energy consumption globally.
And the rapid increase in US natural gas exports will not only affect market dynamics.
An abundant supply of LNG will also encourage many countries to switch from coal and oil-fired power plants to cleaner, gas-powered plants.
Compared with coal, modern natural gas power generation results in 65% to 70% fewer carbon dioxide emissions per unit of electricity.
Concerns about air quality in countries such as India and China are driving initiatives to build cleaner electricity generation infrastructure, like natural gas-fired power plants and renewables.
McKinsey predicts natural gas will be the fastest-growing fossil fuel on the planet by 2030. This rise is driven by both the substantial Asian demand for natural gas, and a slowing global demand for oil thanks to the rise in fuel-efficient and electric vehicles.
Wherever you look, nations are switching to natural gas for environmental and economic reasons. And US natural gas is at the heart of this conversion.
To move all of this natural gas across the oceans from the US to Asia and elsewhere requires a new fleet of specially designed LNG carriers.
2018 was a bumper year for the construction of these vessels, with 53 new carriers added to the global fleet and 59 on order – a 195% increase from the 2017 orderbook.
The majority are being built in shipyards in China, Japan and South Korea. In most cases these carriers will then make return trips to the US to provide the natural gas to power Asia’s economic growth.
For example, Freeport LNG in Texas started operating in mid-2019, with much of its natural gas secured via long-term contracts by companies in Japan and South Korea.
One of these companies, Chubu Electric Power, commissioned Mitsubishi Heavy Industries to build two new LNG carriers to transport natural gas from Freeport to Japan.
These carriers are next-generation vessels with hybrid propulsion plant whose steam turbine and gas engines can run on gas, liquid fuel, or both. They have been designed to a width that allows them to pass through the Panama Canal from US LNG export terminals in the Gulf of Mexico to their Asian destinations.
The first of these carriers to leave MHI's Nagasaki Shipyard & Machinery Works are bound for another US LNG export terminal. The “Diamond Gas Orchid”, “Diamond Gas Rose” and “Diamond Gas Sakura” will transport LNG to Asia from the Cameron LNG facility in Louisiana.
Americans may take little notice of the newly christened ships arriving at their shores. Perhaps they should look more closely: they are a symbol of America’s newfound economic strength as a net energy exporter.
John McKenna is an award-winning business journalist with specialist experience in the energy, infrastructure and industrial sectors, John's stories have appeared in leading British newspapers including The Times and The Daily Telegraph.