Ukraine War contributes to substantial increase in U.S. LNG exports to Europe.
Washington—Annual marketed production of natural gas increased in the United States to a record high in 2022, while total trading value rose for the eighth consecutive year, according to a Cornerstone Research report released today.
The report, Characteristics of U.S. Natural Gas Transactions: Insights from FERC Form 552 Submissions as of July 17, 2023, found that annual marketed production increased 6% over the prior year, reaching a record high of 45,387 tBtu in 2022. This was driven by production increases in the Permian, Haynesville, and Eagle Ford regions. Trading activity, reported by 671 respondents, totaled 162,128 tBtu in 2022, an increase of approximately 2.5% from 2021.
The continued shift to index-priced natural gas relative to fixed-price is a vote of confidence by entities with money at stake.
The United States became the world’s largest liquefied natural gas (LNG) exporter in 2023 after exporting more than 3,866 billion cubic feet of LNG in 2022, up 8.6% from 2021. Approximately 64% of U.S. LNG exports went to Europe in 2022, 74% of which were exported to France, the UK, Spain, and the Netherlands. The U.S. also exported LNG to Germany and Finland for the first time in 2022.
Rising tensions in Europe, including the Ukraine War, contributed to U.S. natural gas prices reaching their highest levels in nearly 15 years, leading the average Henry Hub price to levels unseen since the Global Financial Crisis. Domestic gas consumption increased by approximately 6.7%, from 35,336 to 37,714 tBtu in 2022, and reached a record 90 billion cubic feet per day.
“Global geopolitical tensions redrew the map of natural gas flow in 2022, with Europe becoming the main importer of U.S. LNG,” said Nicole Moran, a Cornerstone Research vice president and coauthor of the report. “The share of U.S. LNG exports to Europe more than doubled between 2021 and 2022, from 29% to 64%, driven by large price differentials between European and U.S. prices.”
Index-priced transactions comprised around 84% of all Form 552 transactions, an increase of 17 percentage points since 2008. For the eighth consecutive year, companies that chose not to report fixed-price volume to the indices comprised a larger share of fixed-price volume than reporting companies (over 67% of volume in 2022).
“2022 saw the largest volume of index-priced transactions and the lowest volume potentially reported to indices since FERC began reporting Form 552 data,” said Greg Leonard, a Cornerstone Research senior vice president and coauthor of the report. “The continued shift to index-priced natural gas relative to fixed-price is a vote of confidence by entities with money at stake.”