CAMERON, Louisiana (Reuters) – Top U.S. liquefied natural gas producer Cheniere Energy (NYSE:LNG) on Thursday said surging U.S. natural gas prices reflect past underinvestment followed by “a demand shock” as Europe seeks to wean itself from Russian gas, and that high prices will spur more production that will benefit consumers.
Gas traded at the main U.S. hub hit $7.30 per million British thermal units (mmBtus) on Thursday, up 96% this year to a 13-year high on record demand. Those prices has companies that consume lots of natural gas calling for curbs on new LNG plants.
“What we are going through now is a demand shock to the industry that came after a relatively long period of underinvestment,” Executive Vice President Anatol Feygin said in an interview at Cheniere’s Sabine Pass LNG export terminal.
“We think the resource is there and our ability to attract that resource and bring it into the right markets will ultimately result in a more attractive domestic gas price,” he added.
Feygin said its existing Louisiana and Texas operations, which together can supply up to 45 million tonnes per year, have ample unused space that could allow for future expansions.
The spike in LNG demand from Europe, as buyers steer clear of Russian gas over its invasion of Ukraine, has not changed Cheniere’s focus on its Asia markets, he said.
“Ultimately the driver of growth for energy demand, for natural gas and LNG, we think is going to continue to be Asia. The plurality of those long-term, 20 plus year agreements have been with Asian counterparties,” Feygin said.
Cheniere’s success has encouraged rivals to propose several new plants along the U.S. Gulf coast. Competition from lower-cost projects has not changed Cheniere’s strategy, he said.
LNG buyers looking to strike deals with new and untested firms are “taking risks of that project developer being able to perform,” he said. “We compete in a differentiated space.”