The first wave of major liquefaction terminals that have started operations along the Gulf and Atlantic coasts since 2016 or are currently under construction primarily used 20-year take-or-pay contracts to finance the billions of dollars in costs to build.
Over the last two years, and accelerating in recent months due to market disruptions from the coronavirus pandemic, buyers in Europe and Asia have been urging US developers to offer more flexible terms such as contracts that might only last a few years to as many as 10 years. That has been a difficult challenge for developers that are relying on banks for startup capital.
During a webcast briefing as the India Energy Forum by CERAWeek wrapped up, Brouillette suggested that there has been movement, as America looks to supply more LNG to the world to facilitate the energy transition to greater reliance on renewable fuels.
“There has been some interest on the US side in shortening the contracts,” Brouillette said. “I think over time you’re going to see those shortened.”
India presents one of the biggest demand opportunities for US LNG exporters, with India having set a target to expand the share of natural gas in the country’s energy mix to 15% by 2030 from 6% currently.
The Indian government has announced new policy and regulatory reforms designed to facilitate that target, including spurring investment in new regasification infrastructure in the country.
During a panel discussion at the conference, Todd Abrajano, head of the US Trade and Development Agency, said his group is partnering with the oil and gas sector to provide funding to facilitate more exports to India and other countries.
“We continue to review projects in oil and gas, clean coal and renewable energy,” he said.
That synergy between industry and governments is key to supporting the gas expansion India is pursuing, SCL Das, director general of hydrocarbons for India’s Ministry of Petroleum and Natural Gas, said during the same panel discussion.
“This is an approach we are going to consistently follow, he said.
While the US is bullish about the LNG opportunity in India, Brouillette acknowledged during the briefing with reporters that trade, market and, perhaps especially global goals to reduce carbon emissions, could strain the industry efforts.
“To say the almost obvious fact, if you want to grow your economy, you have to grow your energy base as well,” the US energy secretary said.
Until climate goals are fully implemented in countries that have made announcements, “there’s going to be dependency on natural gas, on nuclear power, to generate baseload electricity,” he added.