Insight
Creating LNG supply flexibility: drivers of US LNG output
Report summary
The new US LNG supply is adding flexibility to global LNG markets. With oversupply looming in the near term, destination and lifting flexibility US LNG allows ensure its viability in an increasing competitive market. Ample low-cost supplies continue to be developed at lower costs and this keeps Henry Hub lower for even longer. The near term development of associated gas plays like the Permian defers the development of current marginal supply sources whose breakeven are around $3/mmbtu. This implies even when production from plays like Permian plateaus in 2025, the cost of new gas developments remains relatively low Looking forward, there are many proposed, pre-FID LNG projects in the US. Currently, many buyers are weary of signing new long term, foundation-sized contracts to back the development of these projects. To incentivize buyers, these "second wave" projects need to offer alternative commercial terms on top of the flexibility the current US supplies have.
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