President Trump plans to make the case during his trip to India, but the global gas glut has made the market more commoditized

By Collin Eaton / Feb. 23, 2020 10:00 am ET

President Trump is planning to push American shale gas when he travels to India this week. So far, U.S. gas exports have proven to be a tough sell globally.

U.S. companies have struggled to line up foreign buyers willing to sign long-term deals for liquefied natural gas as the world is experiencing a glut of the fuel.

Global buyers including India have instead turned to an increasingly liquid spot market for cheaper LNG, threatening the future of more than two dozen additional natural-gas export facilities proposed in the U.S., which need sizable advance commitments from buyers to secure the billions needed for the projects to go forward.

The U.S. has quickly become the world’s third-largest supplier of liquefied natural gas, thanks to the bonanza of fuel unlocked by the fracking boom. But American companies have struggled in recent years to sell more than spot cargoes, amid competition from rivals in Qatar, Russia and Australia.

From 2011 through 2015, U.S. suppliers struck 37 long-term sales deals with foreign buyers for a combined 67 million tons of gas a year, according to S&P Global Platts. Much of that total reflected deals to line up customers by early U.S. LNG exporters, including Freeport LNG Development LP and Cheniere Energy Inc.

 From 2016 through 2019, U.S. suppliers reached 19 long-term deals with foreign buyers, covering 24 million tons of LNG a year, S&P Global Platts data shows. That total excludes a deal between Exxon Mobil Corp. and Qatar that amounted to a sharing agreement between production partners.

“The low-price environment makes it very difficult to sign long-term deals, and the market is evolving into a more commoditized market,” said Robert Fee, Cheniere’s vice president of international affairs and commercial development. “Yet there is still a clear role for long-term contracts. Some buyers may see this as an opportunity to lock in low prices.”

The Trump administration has championed LNG export deals in trade talks, with former Energy Secretary Rick Perry and other officials touting the potential of “freedom gas” and “molecules of freedom” to help Europe and Asia reduce dependence on Russian and Middle Eastern sources.

U.S. officials have aggressively pursued LNG agreements with countries including China, India, Poland and Ukraine. Thus far, however, fewer concrete deals have emerged since Mr. Trump took office. Three out of four nonbinding LNG agreements the Trump administration announced with China subsequently fell apart, and that was before a U.S. trade war with China disrupted American LNG flows to the country.

When he makes his first official visit to India this week, Mr. Trump will be joined by Commerce Secretary Wilbur Ross and Energy Secretary Dan Brouillette, among other officials, according to a senior administration official. The trip will focus on economic and energy ties between the countries, the official told reporters. 

Mr. Trump will try to lock down a prospective deal publicized when Prime Minister Narendra Modi visited Houston in September. At that time, Mr. Trump touted a $7.5 billion nonbinding LNG agreement between fledgling U.S. exporter Tellurian Inc. and India’s Petronet LNG Ltd.

Such a deal would put Tellurian’s proposed U.S. Gulf Coast export facility, the $27 billion Driftwood LNG project in Louisiana, closer to the total commitments it needs to move forward, and secure a trade victory for Mr. Trump. 

Tellurian Chief Executive Meg Gentle, Chairman Charif Souki and other company officials are headed to India this week to continue negotiations with Petronet. In an interview, Ms. Gentle said she appreciates the president’s highlighting the role of energy in the U.S. economy and isn’t alarmed by a reduction in long-term contracting.

“I view that as a huge positive,” Ms. Gentle said. “We’re seeing fewer and fewer long-term contracts because buyers and sellers are becoming more comfortable that the market is going to be there.” 

Ms. Gentle said Tellurian has roughly two-thirds of the commitments it needs to go forward with the Driftwood project, and is working toward completing a deal with Petronet by the end of March.

Some analysts believe 2020 is a pivotal year for the U.S. LNG export industry, as low-cost rivals in the Middle East and Africa decide on whether to move forward with huge export expansions that could reduce the need for U.S. projects. In addition to Tellurian, Freeport LNG, owned by founder Michael Smith, Global Infrastructure Partners, and Osaka Gas Co.Ltd., and Cameron LNG LLC, owned by affiliates of Sempra Energy, Mitsubishi Corp., TotalSA, and Mitsui & Co. are planning to expand existing U.S. facilities. 

Asian and European buyers are stretched to absorb the LNG circulating on ships around the globe. Some have been turned away in China, following the outbreak of coronavirus. Indian natural-gas company GAIL (India) Ltd. has resold some U.S. cargoes in the past year, according to people familiar with the matter.

“There is only so much appetite globally for supply from the furthest supplier in the world to Asian markets,” said Madeline Jowdy, senior director of global gas and LNG for S&P Global Platts.

Foreign buyers committed to long-term purchase agreements of U.S. LNG are paying almost twice as much as buyers taking cargoes from the spot market. In essence, they are potentially losing $14 million to $17 million per cargo on some contracted shipments, said Dumitru Dediu, a partner at consulting firm McKinsey & Company. Like others, he believes the majority of export terminals proposed in the U.S. will never be built.

“We’re talking about 30 or so projects, and I think only two or three—at most, four—are likely to go ahead,” Mr. Dediu said.

With global commodities traders such as Gunvor Group and Trafigura Group playing a growing role in the LNG market, cheap prices for spot cargoes are forcing U.S. LNG firms to offer cheaper contracts.

In an effort to woo potential customers to 10-to-20 year offtake agreements, some U.S. companies have offered ultralow fees for liquefying natural gas—as little as $1.75 per million British thermal units, according to two people familiar with the matter. That price is below the $2 per-unit capital cost of liquefying the gas for some projects.

Tellurian’s Ms. Gentle remains optimistic, noting that demand for U.S. LNG has continued to grow.

“You’ll still need 75 million tons from the other projects. We really view it as, ‘All are welcome,’” she said.

—Michael C. Bender and Timothy Puko contributed to this article.

Write to Collin Eaton at collin.eaton@wsj.com