Geopolitics is always a critical driver in global energy markets, where the U.S. has played a growing and more dominant role in recent years.

As the U.S. rolls out more LNG capacity, competition in global gas markets appears to be rising and strategic partnerships will play an increasingly important role.

For example, Ocean LNG, an international joint venture marketing company, owned by affiliates of Qatar Petroleum (70%) and Exxon Mobil (30%) recently announced that it will take and market all LNG produced and exported from the Golden Pass LNG export project in Southeast Texas. Golden Pass LNG announced its Final Investment Decision (FID) in February, and construction of the $10 billion, 15.6 million metric tons-per-year liquefaction facility should begin in the near future, with operations expected to begin in 2024.​

In March, Shell U.S. LNG and Energy Transfer Partners announced an FID for an export facility in Lake Charles, LA. The project would convert Energy Transfer’s existing Lake Charles LNG import and regasification terminal to an LNG export facility boasting 16.45 million metric tons per year of liquefaction capacity to be delivered to markets in Asia, Europe and the Americas.

Also in March, Sempra Energy announced that its Energia Costa Azul LNG subsidiary had received two important authorizations from the Department of Energy for developing a re-exporting facility of U.S. gas in Baja, California to Asian markets. The approvals allow for LNG re-export to Non-Free Trade Agreement countries, which is critical to the project’s viability.

All of these announcements demonstrate the continued growth of U.S. LNG export capacity as the U.S. claims the spot as fifth largest LNG exporter with 483 shipments to 28 countries in 2018, a year-to-year increase of 84%. The largest U.S. export markets in descending order include South Korea, Mexico, Japan, and China. Spain was the largest European recipient of US LNG last year, with Russia and other countries competing for market share.

As to Russia, Gazprom’s Q1 exports to Europe and Turkey fell by 10%, while Europe’s LNG exports were up 88% year to year. This is occurring with the backdrop of Gazprom attempting to complete its Nordstream-2 project that would deliver Russian natural gas to northern Europe via two sub-Baltic Sea pipelines that would deliver 1.9 trillion cubic feet per year of natural gas to the EU. Between 2019 and 2023, Europe is expected to add an additional 49 underground gas storage facilities, as it prepares to manage new gas supplies and demand.

The continued development of U.S. shale plays is vital to maintaining and expanding U.S. LNG exports. Adequate takeaway capacity in the Permian Basin continues to be a problem.

As oil and gas production in the Permian reach all-time highs, natural gas prices hit a negative $3.38 per mmBtu, an all-time low. This of course is a significant threat to the viability of Permian oil and gas production, as producers are forced to flare natural gas or potentially shut-in production. While several announced pipelines will help the situation mid-to-long-term, industry will need to work creatively to find ways to utilize that gas and get it to market.

The U.S. is uniquely positioned for natural gas for decades to come, with major opportunities to significantly affect geopolitics, strengthen the security of allies around the world, and improve air quality and greenhouse gas emissions.

Industry’s ability to innovate and address challenges such as takeaway capacity, venting and flaring, and infrastructure needs will play a major role in determining the outlook for long-term success. Based on its track record, industry is more up to the task.

Jack Belcher is senior vice president of Cornerstone Energy Solutions and advises energy, transportation and financial services clients on government relations, regulatory affairs, risk management, ESG management, coalition building and stakeholder relations. He is also managing director of the National Ocean Policy Coalition.