Vitol sees growing demand for U.S. shale gas to fuel LNG exports to China, India and emerging economies in Asia. (Source: Shutterstock/ Vitol)
The gas might come out of the ground in Caddo Parish, Louisiana, or Panola County, Texas—but it will increasingly end up in pipes in Asia and emerging economies around the globe, according to Vitol CEO Russell Hardy.
U.S. LNG exports are expected to grow rapidly in the coming years as a wave of new projects tick online along the Gulf Coast. Natural gas production from U.S. shale plays—the Haynesville and Marcellus shales and the Permian Basin, in particular— are expected to fuel the growing export capacity.
Growing U.S. LNG export volumes are of great interest Vitol, one of the world’s largest commodities trading houses.
“That surplus of gas is now going to be seeking new markets,” Hardy said Sept. 18 at the Gastech Houston 2024 conference.
Since launching nearly 60 years ago, Vitol has expanded from an oil trader into trading other things, like gas and power.
Vitol also owns upstream, downstream and refining assets as the company aims to round out its exposure to the oil and gas value chain, Hardy said.
The U.S. has attracted a considerable amount of Vitol’s upstream investment. Vitol currently backs VTX Energy Partners, a Delaware Basin E&P with assets in Reeves and Pecos counties, Texas.
Vitol sold a second Permian E&P, Vencer Energy in the Midland Basin, to Civitas Resources last year for $2.11 billion. Vencer owned interests in about 44,000 net acres across Texas in Midland, Martin, Upton, Glasscock and Reagan counties.
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Gas growth
Vitol sees a massive step-up in gas supply coming out of the U.S. between now and 2028, when several new liquefaction and export projects are expected to be online.
Europe has been a major buyer of U.S. LNG since the energy crisis in 2022 sparked by Russia’s invasion of Ukraine. The U.S. was again the largest supplier of LNG to the EU and the U.K. in 2023, accounting for nearly half of total LNG imports, according to an Energy Information Administration analysis.
But Vitol expects demand for U.S. LNG to grow in other geographies as supply steps up later this decade.
“This next wave of supply is probably less for Europe,” Hardy said. “It’s much more for Asia and much more for new forms of demand which are emerging.”
China and India are expected to drive LNG demand growth on the Asian continent, Hardy said.
Other growing economies in southeast Asia also see the potential to use imported natural gas to replace coal-fired power generation.
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New markets
Hardy said new use cases for shipping and transportation are driving demand growth for gas around the world.
One sector working to decrease emissions is shipping, which currently consumes around 2.5 million tons per year of LNG for bunkering.
“Shipping’s trying to decarbonize, and we expect that to grow to perhaps 25 million tons over the next few years,” Hardy said. “You could imagine LNG being 10% of the global bunker market.”
Hardy said there’s also a big push for LNG to displace diesel fuel for trucking in China and India, yet another boon for the international LNG business.
China’s sale of heavy-duty trucks powered by LNG grew from less than 10% to at least 30% of the market in late 2023, according to a Wood Mackenzie analysis. That led to more than 8% of road diesel demand in China being displaced by natural gas delivered via LNG.
“This year, 18 million tons of LNG are going to be consumed in China by people driving containers and trucks around,” Hardy said. “Instead of using petroleum, they’re using natural gas.”
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