What is Liquefied Natural Gas?
The United States has become a major player in the natural gas industry globally, thanks to advances in technology that allow for the production and export of Liquefied Natural Gas (LNG). LNG is natural gas that has been cooled to extremely low temperatures until it turns into a liquid. In its liquid form, natural gas takes up far less space, about 600 times smaller than its normal size—making it much easier to store and transport. LNG plays a critical role in moving natural gas efficiently, and the potential of increasing exports could create noticeable effects on energy prices in the US.
What are the current US LNG export levels?
The United States has grown quickly to become one of the largest LNG exporters in the world. In 2023, the U.S. shipped out an average of 11.9 billion cubic feet of LNG every day—a record high and a significant jump from previous years. Those numbers grew even further to 12.6 billion cubic feet per day (bcf/d) just in the first 6 months of 2024. Most of this LNG is processed and exported from large facilities located along the Gulf Coast, in states like Texas and Louisiana to European countries. These export facilities, such as, Freeport LNG in Texas, have expanded significantly in 2024 to handle the increased demand for U.S. natural gas from Europe as they seek alternatives to Russian natural gas. While this benefits natural gas producers, it also means more of the gas is not being sent to underground inventories or for local usage but being redirected to these export hubs to be shipped out. As a result, natural gas prices domestically could see potential upsides as supply levels tightened.
Is US LNG exports going to increase or decrease?
LNG exports are expected to keep growing at a fast pace over the next few years. According to the U.S. Energy Information Administration (EIA), the total capacity for LNG exports is expected to double to 24.4 billion cubic feet per day by 2030. This growth is being driven by large investments in new export facilities and upgrades to existing ones. For example, in the graph (below) it shows the current US LNG export capacity based on the facilities/terminals that are online. The greyed-out figures are the export capacity by terminals that are already running while the colored are the projected capacities for when the indicated newer terminals come online. The incoming Administration has also indicated that they will seek expedited permit approvals for the new construction of LNG export terminals after a previous pause had been in place, further signifying a desire for the US to increase its export levels. This growth in exports could create challenges for domestic supply. While current storage levels are healthy and natural gas production is robust, US natural gas producers may opportunistically start to repurpose the bulk of their production to export, taking advantage of higher profit margins straining domestic supply.
Along with other potential bullish factors such as growth in data center demands related to AI and fluctuations in natural gas production levels. The prospective growth in US LNG exports could add upwards pressure to natural gas prices in the US. In 2016, when exports began, Henry Hub prices averaged $2.50/MMBtu. By 2022, with exports exceeding 10 Bcf/d, prices peaked (amongst other factors) at over $8/MMBtu during tight supply periods. The correlation between LNG exports and natural gas prices becomes even more pronounced during cold winters or disruption. Winter Storm Uri in 2021 saw unprecedented spikes in energy prices domestically due to the freezing temperatures disrupting production while US LNG exports continued to pull from domestic supply. Or during the Freeport LNG outage in 2022, which temporarily lowered domestic prices as natural gas intended to go overseas stayed in the US.
The growing demand for LNG from Europe and Asia, combined with higher export capacities, could tighten domestic natural gas supplies and drive prices upward, particularly during supply disruptions or peak seasonal demand. Additionally, the rapid growth of AI-driven data centers—which are energy-intensive—further amplifies this pressure on energy markets. As data centers proliferate and demand rises, competition for natural gas will intensify, potentially leading to higher energy costs for businesses and consumers.
