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My Aim is True, Encore Edition - New LNG Export Capacity Upends Texas/Louisiana Natural Gas Fundamentals

Big changes are coming to the new epicenter of the global LNG market: Texas and Louisiana. On top of the existing 12.5 Bcf/d of LNG export capacity in the two states, another 11+ Bcf/d of additional capacity is planned by 2028. The good news is that the two major supply basins that will feed this LNG demand — the Permian and the Haynesville — will be growing, but unfortunately not quite as fast as LNG exports beyond 2024. And there’s another complication, namely that the two basins are hundreds of miles from the coastal LNG terminals, meaning that we’ll need to see lots of incremental pipeline capacity developed to move gas to the water. 

In observance of Presidents Day, we are giving our writers a break and revisiting a recently published blog on our Arrow Model. If you didn’t read it then, this is your opportunity to see what you missed!

If we break it down further, looking at Texas and Louisiana separately, we see quite different fundamental dynamics. On the Louisiana side, LNG exports are set to rise faster than production in the state, while in Texas, the pace of production growth generally matches the combo of LNG and Mexico exports for a few years, but eventually lags behind as new LNG terminals come online, requiring the state to pull more gas in from Oklahoma or send less to Louisiana. These developments will drive highly dynamic market conditions, with flow shifts that will impact price differentials, the need for new pipeline infrastructure, and the gas-sourcing strategies for LNG exporters.

As we explore in today’s RBN blog, understanding all of these changes requires a natural gas flow/capacity model specifically targeted to make sense out of the evolving market dynamics in Texas and Louisiana. We’ve got one, and we call it Arrow.

More on the Arrow Model in a minute. First, we want to drive home the point that the magnitude of the changes coming is enormous. There will be a slew of new LNG export terminals — even if the months-long pause on new gas-export licenses announced by the Biden administration on January 26 drags on. We will see rising gas production in both the Permian and the Haynesville. And there will be more pipeline projects than you can shake a stick at. There are a number of wrinkles that have made the outlook particularly dynamic over the past few months. Consider the following market-impacting examples:

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