In January 2018, for the first time in 60 years, the United States became a net exporter of natural gas.
Over the past decade, the rise in shale gas exploration has left the U.S. with more natural gas than it can use, and that’s expected to grow. With an uptick in large scale projects, some predict that “2019 could be the busiest year of Liquefied Natural Gas (LNG).” In fact, by 2022, the U.S. is predicted to be a net energy exporter, and therefore considered energy independent – for the first time since 1953.
The newfound energy independence of the U.S. will have an impact on energy policies and markets around the world. As of March 2018, U.S. LNG has been delivered to 27 countries on five continents, and the list of destinations will continue to grow.
Thanks in part to the increased availability of LNG, the International Gas Union’s (IGU) 2018 Global Gas Report tips 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.
According to MHI’s own Oil & Gas Outlook report, research reveals that natural gas’s rise will coincide with the anticipated plateau in oil demand, only amplifying its importance in the future global energy mix.
In turn, U.S. LNG ’s biggest impact will be aiding global economic growth, particularly in Asia.
Data from the U.S. Energy Information Administration (EIA) shows Asia is already the biggest consumer of U.S. natural gas exports.
And this Asian demand for natural gas is accelerating rapidly. According to McKinsey, by 2030, 65% of global gas demand growth will come from Asia.
A massive construction program to build a series of multi-billion dollar LNG export terminals is under way across the U.S. Many of the new facilities are focused almost exclusively on the Asian market.
But it isn’t just Asia that will increase its consumption of U.S. sourced LNG.
EIA data shows the Middle East and Europe are already importing LNG from the U.S., and this will grow as more U.S. export capacity becomes available.
For example, Saudi Arabia is looking to significantly increase its imports of natural gas for power generation, shifting away from oil-fired plants and freeing up more of its oil reserves to be exported overseas.
And in Europe, U.S. LNG could introduce more competition into the market. With North Sea gas reserves dwindling, European nations are looking to diversify their suppliers to avoid becoming reliant on a single region for sourcing LNG supplies.
IGU’s 2018 Global Gas Report highlights key trends in the global natural gas market and looks toward 2017 as an impressive year for gas demand growth, supported by increased LNG market liquidity and the growing role that gas is playing to meet more sustainable energy supply.
Looking ahead, the rapid increase in U.S. 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 more sustainable options, including gas-powered plants.
Compared with coal, modern natural gas power generation results in 65% - 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.
Moving these natural gas reserves across seas from the U.S. to Asia and elsewhere requires a new fleet of specially designed LNG carriers.
The start of 2018 was a record period for the construction of new LNG carriers. In the first seven months, 28 large LNG carriers were ordered, more than the 26 ships ordered in 2016 and 2017 combined. The record for new orders was set in 2014, with 62 large gas carriers in a single year. The majority of these new LNG carriers are being built in shipyards in China, Japan and South Korea. In most cases these carriers will then make return trips to the U.S. to provide the natural gas to power Asia’s economic growth.
For example, Freeport LNG in Texas will begin operating in 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. These carriers, “Diamond Gas Orchid” and “Diamond Gas Rose”, 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.
A version of this article was previously published on Forbes BrandVoice.