Rising demand from Europe has added to a US natural gas investment boom even as the industry struggles to overcome opposition to pipeline construction.
Production of the fuel reached 3.1 trillion cubic feet for the month of October, according to the most recently available US data, an all-time high and up almost 50 percent from the level a decade ago.
The industry has been in growth mode since the summer of 2021 when Russia began trimming shipments to Europe, according to Steven Miles, a fellow at Rice University’s Banker Institute in Houston.
That comes on the heels of the US shale revolution in the first decade of the 21st century that ultimately led to the United States becoming a net exporter of the fuel in 2017.
The progression has not been continuous, with plummeting natural gas prices crimping investment and leading to the bankruptcy of one of industry’s biggest players, Chesapeake Energy, in June 2020.
But energy companies have become more confident in the long-term demand outlook for the fuel in light of shifting geopolitical dynamics…
…While the growth of LNG has globalized the natural gas market to a limited extent, the dynamics remain heavily localized.
Prices on the benchmark European TTF contract are currently more than six times the level of comparable Henry Hub contract in the United States.
That gap means that LNG exports are priced more closely to the US level, setting the stage for “middlemen” who can move the cargoes to Europe and “sell them at European prices,” said Miles.
Much higher exports of US natural gas could lead to more price consistency across regions — but probably not for many years.
“Maybe in the long run … (the United States will) export so much gas to Europe that prices between Europe, Asia and North America become more aligned,” said Ryan Kellogg, a professor at the University of Chicago specializing in energy. “But I think we’re pretty far away from that right now.”