U.S. LNG Gets Another Boost

Delfin Midstream, a U.S.-based company specializing in export infrastructure for liquefied natural gas (LNG), and producer?Devon Energy Corporation?(NYSE:DVN) (Oklahoma City, Oklahoma) announced a preliminary deal that will further support the U.S. position as a lead natural gas exporter.

The companies announced Monday that they signed a heads of agreement arrangement that deals with Delfin's first-ever plans to develop a floating liquefied natural gas (FLNG) vessel. Both sides said they envision a liquefaction capacity of at least 48.7 billion cubic feet per year (Bcf/yr), though that could nearly double in the future.

Delfin expects to make a final investment decision (FID) on its FLNG facility by the end of the year, boosting the total U.S. export capacity.

"We believe our unique liquefaction solution provides significant structural flexibility that allows producers to maximize the value of their natural gas, while providing a much-needed source of additional supply to the world LNG marketplace," Delfin Chief Executive Officer Dudley Poston said in a statement.

There were 18 vessels laden with LNG that left U.S. export terminals between August 25 and 31, the U.S. Department of Energy reported. All told, they were carrying 67 Bcf of liquid gas, derived primarily from inland shale basins.

The U.S. only began exporting LNG from the Lower 48 states in 2016, but already boasts more liquefaction capacity than any other country in the world. That will go a long way toward resolving some of the energy crises emanating from Russia's war in Ukraine.

Before the outbreak of war in late February, Russia was tied inextricably to the European economy by way of a dense network of natural gas pipelines feeding the continent. The European Union (EU) is the largest importer of natural gas in the world, and at one point relied on Russia for about 40% of its supplies.

The EU is now working to wean itself off Russia, though the consequence is expected to create a real emergency come winter, due to a lack of supplies. Russia, for its part, continues to use its vast natural resources for geopolitical gain, telling its European customers that supplies from the Nord Stream gas pipeline network in the Baltic Sea will continue only when sanctions imposed over the war are lifted.

That leaves it largely to suppliers such as the U.S., Australia and Qatar to fill in the void and, of those, the U.S. may have the greatest potential.

The U.S. Department of Energy put exports of gas in liquid form at 11.1 Bcf/d on average during the first half of the year. Once the three export projects under construction are completed in 2025, total export capacity will increase by another 5.7 Bcf/d.

The U.S., however, is not without its challenges, including hurricanes that can thwart everything from production to shipping. And it's a global market that's facing significant pressure from extraordinarily high commodity prices, particularly for natural gas. But with new developments like the Delfin-Devon handshake, it seems like at least part of the Russia-linked problem in the natural gas market can be resolved.

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