U.S. LNG Feedgas Demand Down on Pipeline Maintenance

Global gas prices have had a record-breaking year so far, with JKM in Asia hitting all-time seasonal highs in spring, and TTF in Europe last week reaching the highest level since 2008. Prices have been spurred on by a global LNG market that is undersupplied and hunting for additional cargoes. If you were just looking at U.S. feedgas levels over the past several weeks, though, you would never know that we are in the middle of an incredible bull run. U.S. LNG feedgas deliveries have trailed below full-utilization levels for more than a month due to a combination of spring pipeline maintenance, LNG terminal maintenance, and operational issues. The reduced availability of pipeline and liquefaction capacity led feedgas deliveries in June to average 9.35 Bcf/d, or about 85% of full capacity. However, this was just a small and short-lived setback before what is likely to be a breakthrough summer for U.S. LNG. Feedgas demand is already back above 95% utilization and is poised to head even higher over the next few months both from new liquefaction capacity coming online and potentially from spot market cargo production. In today’s blog, we take a look at the impact of spring maintenance on U.S. LNG production and potential feedgas demand growth in the months ahead.

After a roller coaster over the past year, U.S. LNG feedgas demand has been holding steady at record levels of around 11 Bcf/d for nearly a month now, with the exception of a few days due to pipeline maintenance. With Train 3 at Cheniere Energy’s Corpus Christi Liquefaction facility online and price spreads to global markets favorable for U.S. exports, that’s where it’s likely to stay, except for maintenance periods — at least until new liquefaction trains start commissioning later this year. Two Louisiana projects, Venture Global’s new Calcasieu Pass facility and the sixth train at Cheniere’s existing Sabine Pass terminal, have both indicated that they will begin exporting commissioning cargoes by year’s end — ahead of their originally proposed construction schedules — a prospect that could boost Gulf Coast feedgas demand to even greater heights by the fourth quarter of 2021. In today’s blog, we wrap up this short series with a detailed look at the two projects and implications for LNG feedgas demand this year.

The U.S. natural gas market’s exposure to global gas and LNG markets has come into sharp focus in recent days. A gas supply crunch in Europe and scant LNG cargoes have roiled the international markets and kicked competition into overdrive. European natural gas and Asian LNG prices are at record highs and locked in a race to the top. The U.S. gas market has been relatively buffered from the full extent of the panic-driven premiums enveloping European and Asian markets, constrained primarily by its limited ability to help meet international demand. In other words, the U.S.’s LNG export capacity ceiling is likely the only thing reining in Henry Hub prices from following European and Asian gas/LNG prices to the moon. As explosive as Henry Hub futures are these days, if not for the capacity constraint, they would be much higher. That ceiling is about to get a little higher, however, as two liquefaction projects — Cheniere Energy’s Sabine Pass Train 6 and Venture Global’s Calcasieu Pass — get ready to export LNG from U.S. shores this winter, amid what’s already the most bullish Lower 48 gas market in years. In today’s RBN blog, we detail the timing and demand implications of these two projects.