The United States and Qatar are vying for the lead in the global liquefied natural gas (LNG) market. While Qatar’s star is on the rise, American producers have a few aces up their sleeve that could give them an edge.

America and Qatar each have a 20% share of the 400 million tonne LNG market per year. Australia is another major exporter, but is likely at or near its peak due to gas supply issues and rising domestic demand. Russia, meanwhile, had big ambitions – and huge reserves to fulfill them – but sanctions have crippled its prospects.

Certainly, Qatar is a formidable opponent. Blessed with vast, cheap gas reserves from its giant offshore North Field, the tiny country approved expansion projects in 2022 that will increase LNG production by 64% — or 49 million tons a year — to 126 million tons a year by 2027.

Qatar Energy is a state-owned entity, so it doesn’t have the same concerns about red tape and regulatory red tape that burden Western companies.

Qatar Energy CEO Saad al-Kaabi recently said the company will sign a record number of LNG supply contracts this year, having already signed two large ones with firms in China and Bangladesh. Al-Kaabi, who also serves as Qatar’s energy minister, says about 40% of new global LNG supplies will come from Qatar by 2029.

However, the United States is also experiencing a significant increase in LNG export capacity. It just doesn’t get the same attention as Qatar.

The United States began exporting LNG in February 2016. As of July 2022, the United States has more LNG export capacity than any other country and has exported more LNG than any other countryaccording to the US Energy Information Administration.

US LNG export developers completed investment decisions (FIDs) on three expansion projects this year that would increase LNG capacity by around 44 million tonnes per year. This is almost equal to Qatar’s mega-expansion projects. These include Venture Global’s Plaquemines LNG and Sempra
WED
Port Arthur LNG and most recently NextDecade’s Rio Grande LNG.

There is still a chance for more new projects this year as developers ride favorable winds in global gas markets. Other potential projects in the queue include Energy Transfer’s Lake Charles LNG, Venture Global’s Calcasieu Pass 2 LNG and New Fortress Energy’s “Fast LNG” concept.

The war in Ukraine and the subsequent disruption of gas supplies to Europe by Russia have benefited US LNG developers. Europe, which has turned to LNG to fill the void left by Russian gas, accounted for 70% of US LNG sales in 2022.

That helped EU to mitigate a potential gas crisis, bringing another major buyer to the LNG market to compete with Asia. Europe became the world’s “premium” LNG market last year, paying high prices for LNG shipments diverted from Asia. Buying commitments from European importers was critical to getting new American expansion projects from the drawing board to reality.

Investment in new LNG carriers from early 2022 represents 27% of total new shipbuilding spending, more than any other industry including containerships, according to the trade publication. Seatrade Maritime. A total of 30 carriers signed new LNG contracts this year worth $7.7 billion.

US producers have some key advantages in supplying global LNG markets, notably flexible contract terms and a competitive environment among project developers. U.S. “no-destination” contracts allow LNG buyers and traders to ship cargo anywhere in the world — usually to the highest bidder, where the gas is most in demand — rather than restricting it to a single destination.

Qatar does not offer the same flexibility. It requires fixed destinations for its cargo, a strategy that helps optimize Qatar Energy’s large shipping fleet and prevents Qatari cargo from competing with each other on the open market.

US LNG pricing models are also more favorable for many buyers. This cost-plus pattern is tied to US benchmark Henry Hub gas prices, which have generally hovered around $2 per million Btu for years due to vast natural gas reserves and production from US shale rock formations. Even with a heat wave hitting the country, Henry Hub prices are still at a paltry $2.50 per MMBtu.

Qatar prefers an LNG price over the traditional oil-linked LNG benchmark, meaning its prices are exposed to the volatility of global oil markets and the whims of the OPEC cartel. This can be a concern, especially since oil prices recently crossed $80 a barrel again. This makes the choice easier for many LNG buyers who appreciate that US LNG contracts offer more flexibility and less exposure to price risk.

The next front in the battle between the US and Qatar will be which producer can offer the greenest and most sustainable LNG – volumes with the lowest carbon footprint. Qatar and the US gas industry are taking steps to maintain a competitive edge in this area.

Qatar plans to increase its carbon dioxide sequestration capacity to 11 million tonnes within a few years, which, combined with the use of solar power in its LNG plants, should ensure the industry’s lowest carbon footprint worldwide.

But U.S. producers are increasingly bringing in third parties to certify their natural gas emissions footprints, and the “responsible sourcing” gas movement is now in its early stages in the United States. That should help keep buyers in climate-conscious economies like Europe, South Korea and Japan — all major LNG importers — interested in U.S. cargoes.

If analysts are right about the return of high demand and the green movement continues to push for cleaner energy options, then the United States and Qatar could emerge as winners.

American developer NextDecade noted that industry experts expect a global LNG shortage by 2030which, if not addressed, may lead to long-term reliance on other, more carbon-intensive fuels such as coal and oil.

This means there is ample room for the United States and Qatar to reap the benefits of rising demand for clean natural gas.