Last Mile of the Way - Moving Gas to LNG Export Projects on the Texas Gulf Coast

A total of 13 U.S. liquefaction trains with a combined capacity of about 58 MTPA (~8 Bcf/d) are either in early stages of operation along the Gulf Coast or under construction and scheduled to be online by the end of 2019. Of that, about 3.2 Bcf/d is being developed along the Texas Gulf Coast. Beyond that, a “second wave” of liquefaction projects is lining up, with as much as an additional 11 Bcf/d of capacity proposed for Texas by the early 2020s. While many of these second-wave projects may not get built, those that do will require the construction or rejigging of hundreds of miles of pipelines, particularly along that Gulf Coast corridor. Several of the first and second wave liquefaction projects have proposed to build laterals that connect to and branch out from nearby long-haul pipelines, creating new Gulf Coast-bound delivery points for Eagle Ford shale gas as well for supply that will eventually move south from supply basins as far north as the Marcellus and Utica shales. Today, we take a closer look at these liquefaction-related pipeline projects and how they will connect to and impact the existing pipeline network.

Much as the rise of natural gas supply in the U.S. Northeast—traditionally a demand region with minimal supply—has required a massive retooling of the pipeline network, the rise of liquefaction demand on the Gulf Coast (which only a few years ago was planning for LNG imports and regasification) will require a similar retooling. This has already happened with Cheniere Energy’s Sabine Pass LNG’s terminal in Cameron Parish, LA. In order for Cheniere to supply the liquefaction trains, it had to modify and expand its Creole Trail pipeline, which was originally intended to move regasified LNG inland from the terminal, to be bi-directional. Sabine Pass also plans on sourcing a good chunk of its gas from the Marcellus/Utica, piggybacking on the modifications/expansions being made to several big pipelines to move gas south to the Gulf Coast. The same will occur in Texas as additional liquefaction facilities come online there, with the potential to substantially disrupt traditional flow patterns and pricing relationships.

As we wrote about recently in Catch a Wave, three liquefaction trains, each with a capacity of 4.4 million tonnes per annum (MTPA)—the equivalent of 1.9 Bcf/d combined—are under construction at Freeport LNG’s facility in Freeport, TX, about 50 miles south of Houston. Osaka Gas and Chubu Electric together have contracted for 100% of the initial train, while BP Energy signed up for the full capacity of the second train and the third train’s capacity was picked up by Toshiba Corporation and South Korea’s SK E&S. The three trains are expected to begin commercial operation in September 2018, February 2019 and August 2019, respectively. Freeport LNG has also floated the idea of a possible fourth train. Farther south near Corpus Christi, TX, Cheniere is developing Corpus Christi LNG, a greenfield project including two 4.5-MTPA trains (combined gas consumption, ~1.3 Bcf/d) that are under construction and scheduled to come online in late 2018/early 2019. Cheniere has plans to ultimately add three more trains of the same capacity by the early 2020s, and has already contracted 8.42 MTPA under take-or-pay agreements worth an annual fee of $1.5 billion for 20 years. The third train has yet to receive a Final Investment Decision (FID), but it’s fully permitted and Cheniere has lined up at least one contract and is working on others. And, as we noted above, there is a potential second wave of liquefaction projects in the queue that would add even more export capacity if the global market can absorb it, and we expect that at least some of that will be built. Among those are: