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Blurred Lines - As the U.S. Races Toward 30 Bcf/d of LNG Exports, What Could it Mean for Upstream Markets?

The momentum for U.S. LNG right now is powerful. With Europe’s efforts to wean itself off Russian natural gas boosting long-term LNG demand and Asian consumption expected to grow even further, there has been a strong push for new LNG projects in North America. So far, that has helped propel two U.S. projects, Venture Global’s Plaquemines LNG and Cheniere’s Corpus Christi Stage III, to reach a final investment decision (FID). With these two projects getting a green light, total export capacity in the U.S. will be at least 130 MMtpa — or 17.3 Bcf/d — by mid-decade. That top-line export capacity could be much higher, however. There are currently eight U.S. Gulf Coast pre-FID projects with binding sales agreements, and a handful of projects that are fully subscribed in credible non-binding deals. If all those projects go forward, it would add a staggering 86 MMtpa (11.4 Bcf/d) of export capacity to the U.S., pushing the total toward 30 Bcf/d, or 225 MMtpa. In today’s RBN blog we look at U.S. LNG under development, how high export capacity could go, and the implications for the U.S. natural gas market.

The U.S. currently has 90.85 MMtpa (12 Bcf/d) of operational capacity at LNG export facilities, including Calcasieu Pass, which is still commissioning its last few trains but is expected to be fully in service soon. Beyond those, there are three projects that have taken FID and are under construction along the U.S. Gulf Coast — Plaquemines (see Jump in the Line) and Corpus Christi Stage III (see Jump in the Line, Part 2) both recently got their final go-aheads, as we mentioned in the intro, and ExxonMobil and QatarEnergy's Golden Pass, which took FID back in early 2019 and is expected online in 2024. [There are also projects under construction in Canada and Mexico (see our Go West series).] Beyond the Gulf Coast projects that have taken FID, there are several hoping to capitalize on the current market momentum. At RBN, we evaluate prospective LNG export projects based on their commercial, regulatory and infrastructure/feedgas progress and, from there, put them into three categories: probable, possible or speculative. In the possible category we further break this down into three tiers of likelihood based on how close they are to FID. Our full account of all projects and the progress they’ve made toward FID is available in the LNG Voyager Quarterly Report, the latest of which was released earlier this month.

Prior to this year, the lowest tier in the possible category — Tier 3 — was by far the most numerous category. There were plenty of LNG projects announced but very few with a genuine shot at a near-term FID. Most had made just a little progress, usually on the regulatory front, but it didn’t seem likely that many, if any, would ever take FID. Now we have eight land-based U.S. Gulf Coast projects that we categorize as probable (dark orange diamonds and project names in Figure 1) or possible (Tier 1, light orange; Tier 2, yellow), not to mention other offshore projects (the topic of an upcoming blog) and projects in Mexico and Canada. When you evaluate each of these individual projects on its own merits, a strong case for FID can be made for every one. But together, as a big picture, we’re talking about 86.1 MMtpa (11.4 Bcf/d) of new export capacity in a very small geographic footprint. It’s an almost unthinkable amount of LNG. The lines between the categories — differentiating what will be built and what won’t — and even the lines between FID and not — are blurring, but it’s increasingly looking like most of these projects, and potentially others out there, will go forward. And, as we mentioned in the introduction, that will have a significant impact on the U.S. natural gas value chain — from upstream to downstream — particularly on the Gulf Coast.

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