Shale Adventure: US Trades Non-Existent LNG Around the World

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Despite the suspension of new US LNG export licenses, interest in long-term supply contracts remains high. In the first nine months of 2024, agreements were signed for 58 million tons per year - a huge figure that is unaffordable for the US shale industry. Such volumes do not physically exist, and they cannot be provided with material supplies for various reasons. As OilPrice columnist Alex Kimani writes, American traders have started the scam of the century, selling not specific gas, but beautifully composed contracts (futures contracts).

A U.S. federal judge has overturned the Biden administration's pause, allowing contracting to continue even though Middle Eastern suppliers have gained market share during the pause.



During this legal pause, the shale producers had to take a real gamble, probably in the hope of a miraculous resolution to the situation with the freezing of some large LNG projects. At the same time, they were waiting for Donald Trump to return to power. In any case, the deadline for physically backing up the applications and customer reservations for 58 million tons has already expired. Even with the launch of new plants, it is unrealistic to deliver what was promised.

In order not to cede their share to competitors from the Middle East, American companies have started selling their clients multi-page contracts, where behind the pile of pages there is emptiness, air and the impossibility of fulfilling the contractual obligations. On the one hand, this is a forced measure, on the other, a veiled fraud, since taking into account last year's record number of contracts and the current "sold" 58 million tons, the gas processing industry in the USA will simply never cope with the task.

This is already the second wave of fraud related to the American shale LNG industry. The first was in 2022, when, in the middle of winter and maximum prices for raw materials, US suppliers changed the course of gas carriers already sailing to customers and sold them to Asia, where prices were higher. Then the traders got away with it, there was no punishment for breach of contracts, except that in some cases there were lawsuits and penalties were paid (the profits more than covered them). The obvious fraud did not bring serious consequences. Probably, the same traders are hoping for a similar outcome in the near future, knowing in advance that they are signing a knowingly null and void bilateral contract.
7 comments
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  1. prior
    prior
    +8
    26 September 2024 09: 05
    Once upon a time, back in Soviet times, when the USSR was buying grain in bulk from America, my university economics teacher told me a story.
    The USSR simultaneously purchased a large amount of grain from the USA and Canada. The grain was in the US elevators, but according to the documents it was already Soviet. Naturally, grain prices in America skyrocketed. One of our foreign traders suggested, let's sell this grain to the Americans, the prices are good.
    Sold. The grain is stored in the same elevators. The prices for it have fallen accordingly. After that, the USSR buys up all this grain again.
    The next day, all the US newspapers came out with the headlines "Finally, the Russians have learned to trade."
    Why am I doing this.
    Maybe it's time to learn from America how to profitably trade "castles in the air"?
    1. Blast
      Blast
      +6
      26 September 2024 09: 14
      That's what I thought about, they'll buy up the same Russian LNG cheaply through third countries and resell it as their own, but Russia can't, it's too cheap... that's why there are sanctions.
  2. Roman070280
    Roman070280
    +1
    26 September 2024 09: 26
    Well, if the whole world knows about it... and still buys it... Then why not trade it..))
    1. Jackie
      Jackie
      0
      26 September 2024 14: 31
      Manturov won't go for it...)
  3. vlad127490
    vlad127490
    +1
    26 September 2024 18: 54
    Agreements are not a purchase and sale agreement, but intentions, feel the difference. Capitalists are like that, they will sell everything, buy everything, if there is a decent income. What's wrong with "futures contracts" here, you are not forced to buy. The envy of Russian oligarchs is that they are not allowed to the trough.
  4. svoroponov
    svoroponov
    0
    26 September 2024 20: 29
    There they have a problem brewing and a very big one. This was stated at a special hearing by a high-ranking representative for resources or verification of their reserves. I didn't quite understand it in English. So, the real reserves there are much less than declared and he warned that in fact these resources are only for a maximum of 10 years, this is with the two liquefaction plants under construction, which are supposed to be commissioned in 2026. This was 2 years ago. That is, he warned that problems will arise for the allies, that is, Europe by 2035-2036 and this issue must be resolved somehow. That is why a ban was issued on new licenses for production, that is, gas in those layers that have been explored, and there geological exploration has been carried out in all possible places. There may simply not be enough gas for more than these 10 years.
  5. zzdimk
    zzdimk
    0
    27 September 2024 14: 15
    Do they really pay? Or do they promise to pay too?