Challenges for LNG Expansion

The top five LNG importing countries are shown in Table 1 below, with other countries grouped by region for comparison. Table 1 indicates that the U.S. has a significant foothold in the global LNG market, and is currently importing about 10% of global supply. However, unlike the U.S., most of the other importing countries have government-owned or -subsidized utilities and manufacturing industries, which affects long-term LNG purchasing strategies.

Table 1. Top LNG Importing Countries, 2004

Country
2004 Imports (BCF)
% of World Total

Japan
2,873
44.5%

South Korea
1,048
16.2%

United States
652
10.1%

Spain
618
9.6%

Taiwan
332
5.2%

Other European Countries
805
12.5%

Other Asian Countries
93
1.4%

Other Caribbean/Central American Countries
31
0.5%

World Total, 2004 (NOTE 1)
6,453
100%


NOTE 1: Totals may not add due to rounding.

Many of the major LNG importers outside of the U.S. have locked-in long-term supply contracts with the support of their respective governments, and 20-year contracts are not uncommon [12]. These long-term contracts imply dedicated LNG tankers traveling dedicated supply routes. However, the U.S. government does not currently negotiate long-term supply contracts for the U.S. gas market, since this is handled by the private sector. Therefore, it is possible that the U.S. will continue to obtain a higher proportion of imported LNG through spot markets, as compared with other countries with socialized energy sectors and locked-in LNG supply. This could have the effect of maintaining upward pressure on U.S. gas prices despite increased LNG imports.