Why Global Buyers Are Paying For LNG Shipments, But Not Taking Deliveries

A glut of liquefied natural gas and other fuel, and demand shocks caused by the coronavirus, continue to rattle the energy industry.

By Alexandra HartJune 15, 2020 12:31 pm, , ,

In May 2019, President Donald Trump visited Sempra Energy’s liquefied natural gas plant in Louisiana. He declared the U.S. “the energy superpower of the world.” Like Louisiana, Texas had recently made big investments in liquefied natural gas, or LNG, exporting facilities along the Gulf Coast, including a new one in Freeport. But shipments of LNG have since fallen by 60% since their peak, earlier this year.  

Energy insider Matt Smith is director of commodity research at ClipperData. He told Texas Standard host David Brown that even though the pandemic significantly curbed energy demand, there’s still too much LNG on the market. That has led producers to significantly cut prices.

“You’ve got these companies that have these ‘take-or-pay’ agreements,” Smith said, “where you either take the gas, or you have to pay for it anyway.”

He said companies are paying, but not taking the gas, for which they have no storage space and no market in which to sell it. 

What you’ll hear in this segment:

– How reduced energy demand is affecting other fuel markets and other parts of the world

– Whether last week’s tropical storm had an impact on Gulf energy production

– What could happen if this year’s hurricane season produces a lot of storms

The headline of this story has been updated to reflect the fact that it’s global buyers, not Gulf Coast energy plants, that are paying for shipments of LNG, but not taking deliveries.

Web story by Shelly Brisbin.

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