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Rise In Liquid Natural Gas Exports Signals Return Of Domestic Gas Markets

Cold weather, plant closures and export facility outages fuel global demand

WASHINGTON, D.C. — After suffering a sizable drop in the summer due to COVID-19 restrictions, U.S. liquefied natural gas exports finished the year by reaching a record high, according to the U.S. Energy Information Administration (EIA).

The U.S. benefited from outages at export facilities in several countries, as well as increased traffic in the Panama Canal. Colder winter weather in Asia and Europe, along with coal plant closure in South Korea, also helped fuel the global demand, the EIA said on its short-term energy outlook on Jan. 12.

Over the summer, exports of liquid natural gas were the lowest in over two years, but by November they hit a new high and continued to increase another 4 percent to December, the EIA reported.

(Courtesy U.S. Energy Information Agency)

The government agency forecast similar high demand through February 2021 at levels 30 percent more than 2020.

“Natural gas markets globally traversed a course with oversupply, productivity gains and historically low prices earlier this year but have recently seen that transition to a recovery in demand and U.S. exports,” the American Petroleum Institute’s chief economist Dean Foreman wrote in a recent blog post.

He said the encouraging signs are that key enabling energy demand and production have rebalanced and remained ample, trade flows have resumed course, and consumer prices have remained historically low.

“This reinforces the importance of global prosperity and trade relations – especially across Europe and Asia – as well as with Mexico and Canada, with whom supply chains are integrated across the energy complex and manufacturing,” Foreman said.

U.S. natural gas production has soared after the development of hydraulic fracturing, or “fracking,” and multidirectional drilling, which has enabled drillers to release natural gas that had been previously trapped in underground shale formations. The change has allowed the U.S. to become the world’s largest oil and gas producer, with natural gas production increasing 70 percent between 2005 and 2018, according to Columbia University.

“The development and deployment of innovation in hydraulic fracturing and multidirectional drilling has catapulted the U.S. to the world’s number one producer of oil and natural gas,” former Deputy Secretary of Energy Mark W. Menezes said in a press release.

Record-low prices for natural gas may result in countries accelerating their replacement of coal as an energy source, KPMG said in a report.

The increased natural gas production has been good for the economy. A 2015 Dartmouth University study showed that 725,000 jobs were created between 2005 and 2012 due to increased production.

In this handout from the U.S. Coast Guard, a U.S. Coast Guard boat helps the Liquified Natural Gas container ship Berge Everett as it comes inbound May 8, 2006 in Boston, Massachusetts. (Photo by Kelly Turner/U.S. Coast Guard via Getty Images)

But natural gas production has also drawn criticism from environmentalists who argue that fracking is bad for the natural environment. Burning natural gas releases carbon dioxide into the atmosphere, which is the primary greenhouse gas creating climate change.

“The main way gas is extracted, fracking, poisons water, releases radioactive isotopes, and harms communities that live near the wells,” the Rainforest Action Network said in a blog post. “Despite the name, ‘natural’ gas is one of the most destructive types of fossil fuel. While it has a half life, methane is 84 times more potent than carbon dioxide in the first 20 years. This means, if we want to fight climate change fast, we absolutely must keep gas in the ground.”

By liquefying natural gas, producers can export it for use as fuel without having to rely on pipelines, which is how natural gas is generally moved domestically. The U.S. became an exporter of liquefied natural gas (LNG) in 2016.

The EIA said that despite opposition from environmentalists it expected the global demand for liquefied natural gas to continue increasing.

The growth in exports come after a summer where market forces, along with an economic slowdown fueled by the global COVID-19 pandemic, threatened to hobble the surging industry. U.S. exports also faced competition from global rivals, with Russia and Qatar capturing large shares of the global LNG export market, according to a Brian Myers, a student of New York University’s Center for Global Affairs, in a blog post published by the Council on Foreign Relations.


Asian countries are the largest importers of LNG, which use it as a replacement for coal-fired power plants.  But increased production and flagging demand drove down the price for LNG, and the U.S. gas export market was impacted by trade relations with China, Myers said.

As China’s economy grows, along with efforts to improve its environment, the nation’s ability to meet its natural gas demands has fallen behind, Stephen O’Sullivan, senior visiting research fellow for the Oxford Institute for Energy Studies wrote. LNG now represents nearly 60 percent of the country’s gas imports, and the U.S. became one of the Asian country’s major suppliers, O’Sullivan said. In fact, China represented 15 percent of all U.S. LNG exports.

In October, former President Donald Trump extended the terms of several long-term trade agreements on LNG until 2050, a move meant to bolster the industry’s exports. President Joesph R. Biden has not made any announcements about natural gas exports since taking office.

The U.S. is the top global producer of natural gas with exports reaching 38 countries.

(Edited by Bryan Wilkes and Rebecca Bird)

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