The Louisiana natural gas market has undergone major changes in recent years, from the decline of its offshore and onshore production volumes to the emergence of new export demand from LNG terminals. But there are many more changes on the way. The industry has plans to add another 5.0 Bcf/d of liquefaction and export capacity in the Bayou State between now and 2023. At the same time, there are a slew of pipeline projects designed to carry Marcellus/Utica gas supply to the Perryville Hub in northeastern Louisiana. And, Louisiana’s own gas supply is soaring from the Haynesville Shale. The timing of these emerging factors will drive supply-demand economics and volatility in the region — including at the national pricing benchmark Henry Hub — over the next five years. Today, we take a closer look at the timing and extent of the supply and demand factors affecting the Louisiana gas market.
In Part 1 of this series, we laid out the premise that the Louisiana market is at the epicenter of a major transformation that will play an important role in balancing the overall U.S. gas market. New LNG export facilities along Louisiana’s Gulf Coast — along with growing export demand downstream of Louisiana in Texas and Mexico — are making it the destination market of choice for U.S. gas producers. And, there are major infrastructure investments going into building the pipeline capacity to connect the fastest growing supply basins — Marcellus/Utica and Permian — to this new demand source. Over the next couple of years, these trends will disrupt flows and pricing relationships in and around Louisiana.
To understand how these changes will affect the Louisiana market’s supply-demand balance and pricing, we devised a seven-corridor framework to analyze gas flows in and out of the Bayou State. Specifically, we divided the flow data into the following corridors: Upper and Lower East, Upper and Lower West, North, Offshore Gulf and Central. Within these corridors, we identified meter locations or segments that best measure the net receipts and deliveries for gas moving across the state line. We did this using daily pipeline flow data from our friends at Genscape (For more about pipeline flow data, see Sooner or Later).