U.S. LNG Producers Seek Higher Prices Amid Rising Costs

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Several U.S. liquefied natural gas (LNG) producers are looking to renegotiate higher prices with buyers due to increasing construction, labor, and borrowing costs, according to industry sources and company statements reviewed by Reuters.

These price adjustments could impact the competitiveness of U.S. LNG on the global market, especially as the Trump administration pushes for further industry expansion.

Rising Costs Threaten U.S. LNG Competitiveness

Alex Munton, director of global gas and LNG research at Rapidan Energy Group, warned that U.S. LNG could face a double blow from escalating costs and increasing competition.

"The competitiveness of U.S. LNG could face a double whammy," Munton stated, highlighting:

  • Higher liquefaction costs
  • A tightening domestic gas market
  • Falling oil-indexed LNG prices from competing suppliers

These factors could erode U.S. LNG’s cost advantage, making exports less attractive to global buyers.

Companies Seeking Higher Liquefaction Fees

Four sources revealed that Mexico Pacific and Venture Global LNG are attempting to renegotiate supply agreements, while Energy Transfer (ET) confirmed similar efforts during an earnings call.

Mexico Pacific’s Negotiations with Chinese Buyers

  • Mexico Pacific, which is developing a 15 million metric tonnes per annum (MTPA) LNG facility in Western Mexico, is negotiating higher liquefaction fees with Chinese buyers Zhejiang Energy and Guangzhou Gas.
  • The request for price increases stems from rising construction costs, with U.S. firm Bechtel—tasked with building the facility—demanding higher payments.
  • Neither Mexico Pacific nor Bechtel provided a comment on the situation.

According to sources, Zhejiang and Guangzhou have rejected the price adjustment proposal, though exact figures were not disclosed. Guangzhou has even requested to reduce its contracted LNG volume from 1 MTPA to 700,000 tons per annum.

Venture Global Also Seeks Price Adjustments

  • Venture Global, the second-largest U.S. LNG exporter, is also attempting to renegotiate higher prices for its CP2 project in Louisiana—despite the fact that construction has yet to begin or receive financial approval.
  • The company has not commented on the negotiations, but earlier this year, it informed investors that liquefaction fees could rise above $4 per million British thermal unit (mmBtu), up from the current $2.25 per mmBtu.

Energy Transfer Aligning Fees with Rising Costs

  • Energy Transfer (ET), which is developing a 16.5 MTPA LNG export facility in Louisiana, stated during its February earnings call that it is also negotiating higher liquefaction fees with buyers.
  • "Everybody understands how costs have risen. And we are in continued negotiations with those to renegotiate their fees," said Marshall McCrea, Co-Chief Executive Officer of Energy Transfer.
  • Despite the price adjustments, McCrea noted that customers have remained committed to the project.

Cheniere and Baker Hughes on LNG Costs

Unlike other producers, Cheniere Energy, the largest U.S. LNG exporter, has opted not to increase its fees. The company cited:

  • Inflation-linked pricing structures already in place.
  • Brownfield construction cost advantages, which lower expenses compared to greenfield developments.

Meanwhile, Baker Hughes, a major supplier of LNG equipment, acknowledged cost pressures but noted that the biggest increases are affecting engineering, procurement, and construction (EPC) firms rather than equipment suppliers.

Outlook: LNG Liquefaction Costs Likely to Keep Rising

According to brokerage Poten and Partners, liquefaction fees for U.S. LNG projects are expected to surpass $2.50 per mmBtu due to:

  • Labor shortages
  • Higher construction costs
  • Persistently high interest rates

Poten warned that these increasing costs could undermine U.S. LNG’s competitiveness, particularly if domestic natural gas prices rise or Brent crude oil prices decline.

"On top of a labor shortage, inflation is driving up the price of equipment and materials," Poten stated.

As cost pressures continue to mount, U.S. LNG developers face a critical challenge: balancing price adjustments with maintaining their position in an increasingly competitive global market.