Zusammenfassung:The processing fees for US liquefied natural gas (LNG) projects have increased due to the rise in interest rates.
Long-term buyers of U.S. liquefied natural gas (LNG) from the United States are willing to accept higher liquefaction fees at newer export projects, according to analysts and developers familiar with the situation.
The United States will be the world's second largest LNG exporter by 2022, thanks to abundant natural gas resources and very inexpensive processing costs per metric ton of LNG. Rising loan rates and higher building expenses, on the other hand, have increased liquefaction fees, often known as tolling fees.
“We would naturally expect increased costs of project development, due to higher interest rates or other factors, to have a corresponding impact on liquefaction fees,” said Lyle Hanna, vice president at Commonwealth LNG, one of many U.S. LNG export projects awaiting financing approval.
According to Jason Bennett, a partner at law firm Baker Botts who negotiates LNG contracts, the Dutch Title Transfer Facility (TTF) pricing has been substantially higher since Russia's invasion of Ukraine last year and is unlikely to recover to pre-invasion levels.
Bennett explained that long-term clients are ready to pay higher tolling costs and, ultimately, higher prices for US LNG because newer projects continue to provide extremely excellent profits due to low gas prices at the Henry Hub, the key trading center for US natural gas futures.
“US LNG remains the world's best source of low-cost LNG...If the price used to be $2.25 (per million British thermal units) and it's now $2.75, that's OK, but it's still the cheapest price of LNG,” Bennett said.
According to Jason Feer, global head of business intelligence at LNG shipping and brokering firm Poten & Partners, the most recently permitted project, NextDecade's (NASDAQ:NEXT) Rio Grande LNG, upped its liquefaction fee when project costs soared.
NextDecade has not responded to inquiries about its processing fees. NextDecade, on the other hand, reported revisions to its contracts with all of its long-term customers save France's TotalEnergies (EPA:TTEF) and Japanese trading company Itochu in a July 20 file with the Department of Fossil Energy and Carbon Management.
“The offtakers agreed because the project was very far advanced and ready to go to FID (financial investment decision), and I think some of those contracts were very low-priced by current standards,” Feer explained.
Cheniere Energy (NYSE:LNG), the largest US LNG exporter, has reduced project financing costs by funding its newest Stage 3 expansion project from its balance sheet.
“Increasing our own equity in our projects and, as a result, lowering the level of debt required to fund our expansions is a competitive advantage,” the business stated.
According to Poten's Feer, other developers are increasing equity involvement in new projects to offset the impact of higher interest rates on finance costs.