Natural Gas

Thursday, 10/29/2020

The natural-gas market disruptions hitting the Texas-Louisiana coast so far in 2020 — a pandemic, the collapse of the LNG export market, a rare hiccup in Permian gas production, and multiple hurricanes —threw a big wrench into market expectations. Everything had been moving along pretty smoothly since mid-2016, when the first of a series of new liquefaction trains came online at Sabine Pass LNG. As new LNG export capacity started up at Sabine Pass, Corpus Christi, Cameron, and Freeport, so did relatively steady, predictable growth in feedgas demand. Then came this crazy, unforgettable year. Still more liquefaction capacity started up, but LNG export volumes plummeted, mostly due to very weak export economics. Recently, LNG exports have been picking up and, whenever hurricanes stop pounding the Gulf Coast, the U.S. will likely finally experience the full impact of all 9.15 Bcf/d of export capacity operating at full strength, requiring nearly 10 Bcf/d of feedgas across the U.S, almost 9 Bcf/d of which is located in Texas and Louisiana. Gas flow patterns across Louisiana’s dense network of pipelines already are shifting in response to the incremental demand and are signaling increased supply competition along the Gulf Coast this winter. Today, we continue our series discussing the changing flow patterns along the U.S. Gulf Coast, this time providing an overview of the main drivers of those shifts to date, including LNG feedgas demand and Northeast inflows.

Wednesday, 10/28/2020

Natural gas production has been growing in Western Canada in recent years with an increasing share of that supply coming from core areas of activity within the Montney and Duvernay plays. This tighter focus has forced TC Energy to rework and expand its giant Nova Gas Transmission Limited pipeline system, a network that originally gathered gas supplies across a much larger geographic footprint. The problem is, it took far longer than expected for the latest round of NGTL expansions to win final approval from Canadian regulators. Today, we review the next phase of the pipeline’s system development, and what the regulatory delay might mean for Western Canada’s gas market.

Tuesday, 10/27/2020

Back in January, when the International Maritime Organization implemented more stringent limits on sulfur emissions for large, ocean-going vessels, the vast majority of shipowners and charterers complied with the new rule — commonly referred to as IMO 2020 — by switching to very low sulfur fuel oil or gasoil. A few others stuck with old, higher-sulfur bunker but installed scrubbers to remove sulfur from the engine exhaust. A third option — fueling ships with LNG — is now gaining traction, in part because it could help shipping companies deal with future IMO mandates on reducing greenhouse gas emissions. Orders for new-build LNG-powered vessels and LNG bunker ships are rolling in, and plans for port infrastructure to support LNG bunkering are being implemented. Today, we begin a series on the growing use of LNG in global shipping.

Thursday, 10/22/2020

Over the past decade, floating LNG — for liquefying and shipping offshore natural gas supply — emerged as a promising technology that would enable development of smaller, more remote offshore gas fields around the world. But with a handful of projects now completed and in commercial operation, the challenges of financing, developing, and operating this relatively new technology are overshadowing its prospects. Of the more than 20 FLNG projects that have been proposed since 2007, only five have crossed the finish line and only two others have reached a favorable final investment decision (FID). Moreover, Shell’s Prelude FLNG offshore Northwest Australia — the largest of the existing FLNG facilities — has been dogged by issues since its commissioning in mid-2019, and the operator last week said the unit will not produce any more LNG cargoes this year, after being shut down since February for electrical problems. Today, we examine the headwinds facing FLNG projects.

Monday, 10/19/2020

By the middle of the decade, LNG Canada should be sending its first cargoes of Canadian-sourced LNG to Asian markets. More importantly, Canada for the first time will have an alternative export market for its natural gas supplies — for more than 50 years, piping gas south to the U.S. has been its only option. But getting gas from the Montney and Duvernay production areas to the British Columbia coast is no easy task. It requires the construction of an entirely new, 2.1-Bcf/d pipeline — expandable to 5 Bcf/d — much of it over very rugged terrain. Coastal GasLink, as the planned pipe is known, has also faced major regulatory hurdles. Today, we conclude a two-part series with a look at where the pipeline project stands today.

Sunday, 10/18/2020

The Permian is set to send increasing volumes of natural gas to the Texas Gulf Coast next year, but it is unlikely to be the flood that was once expected. This year’s decline in oil prices has slashed budgets for West Texas producers and rig counts show no sign of a big rebound anytime soon. As a result, growth of oil and associated gas from the Permian will be tepid at best over the next few years, which is a major change from when oil prices hovered north of $50/bbl. Despite the moderation in gas volumes out of the basin, infrastructure changes in 2021 are likely to roil Permian gas markets and have important knock-on impacts for adjacent regions and end-users that depend on West Texas supply. With much less incremental gas from the Permian, there are likely to be significant shifts in gas flows, particularly across the Texas-Louisiana border, to help meet the big increases anticipated for LNG exports. Today, we continue a series that highlights findings from RBN’s new, Special Edition Multi-Client Market Study.

Wednesday, 10/14/2020

With the rise of U.S. LNG exports in recent years, southern Louisiana has become a focal point for natural gas demand, pulling in gas supply from near and far and all directions. That market was severely disrupted this summer as COVID-19 decimated global LNG demand and hammered the economics of U.S. LNG exports. Pipeline flows into southern Louisiana during those months went from record-breaking highs that pushed the limits of the area’s infrastructure capacity to levels consistent with 2018, when the Bayou State’s LNG export capacity was just 2.65 Bcf/d, compared with 4.9 Bcf/d now. More recently, an active hurricane season has also curtailed exports. But demand for U.S. LNG is rebounding, and as LNG feedgas heads back to its previous highs and beyond, a new flow dynamic is emerging along the Gulf Coast, driven by the 1.35 Bcf/d of new export capacity in Texas that came online this year. Flows between Louisiana and Texas are reversing as an increasing amount of gas is needed on the western side of the Sabine River to feed the Corpus Christi and Freeport LNG facilities. The incremental gas demand and flow reversal will create new challenges and constraints for the region’s pipeline infrastructure as steady exports resume. Flows into Louisiana will be higher than ever, but so will flows out of Louisiana heading west to serve additional LNG demand. Today, we begin a series discussing how LNG demand is changing gas flows along the U.S. Gulf Coast.

Monday, 10/12/2020

Global LNG demand has picked up, cancellations for U.S. cargoes have subsided, at least for now, and there’s upside to U.S. cargo activity once tropical storm-related disruptions are resolved. But positive netbacks year-round are no longer a foregone conclusion for U.S. offtakers. As global oversupply conditions persist, at least on a seasonal basis, and supply competition intensifies, the economic decision to lift U.S. cargoes will be much more nuanced than it was in previous years. What do the economics for cargoes this winter and beyond look like? Today, we put the LNG economics model to work to understand what’s in store for U.S. LNG in the coming months.

Sunday, 10/11/2020

Permian natural gas production is now expected to grow at a subdued pace over the next five years, as lower oil prices and a focus on capital discipline have slashed rig counts. Few observers see the Permian situation changing anytime soon, especially as crude oil prices continue to hover around $40/bbl. That said, the Permian gas market will be anything but dull over the months and years ahead. More than 4 Bcf/d of new outbound pipeline capacity from the Permian to the Gulf Coast will be coming online next year, throwing natural gas flows from West Texas into flux and deeply impacting neighboring markets. While natural gas basis at the Permian’s primary Waha hub should improve dramatically, outflow to the Midcontinent will likely fall sharply and potentially reverse, and the Texas Gulf Coast will see an influx of supply on the new pipelines. Today, we continue a series that highlights findings from RBN’s new, Special Edition Multi-Client Market Study.

Wednesday, 10/07/2020

When plans for LNG Canada, a big LNG export project on the British Columbia coast, were sanctioned two years ago this month, the move came as a welcome sign that Western Canadian natural gas producers might finally be able to break their long-standing reliance on just one export customer: the U.S. Access to Asian and other overseas gas markets became a high priority, in part because U.S. demand for Canadian gas had been sagging for years as production in the Marcellus/Utica and other U.S. plays came to meet the vast majority of domestic needs. But while construction on LNG Canada has steadily advanced, there are signs that delays could be mounting. Today, we begin a two-part update on this all-important Canadian LNG export project and its accompanying Coastal GasLink pipeline.

Monday, 10/05/2020

Expectations for Permian natural gas are far from what they were when this year started. Lower crude oil prices and a focus on capital discipline have slashed rig counts by about two-thirds since January and there are few signs of a recovery on the horizon. As a result, just about everyone’s forecast for Permian gas growth is much lower than just a few months ago, with tepid gains through the early 2020s now the industry’s consensus view. However, if you think all this means that Permian gas markets have lost their relevance, think again. Despite the modest production growth anticipated, the basin’s gas flow patterns will soon be thrown into shock as 4 Bcf/d of new outflow capacity to Gulf Coast markets starts up next year, when the Permian Highway and Whistler pipelines begin operation. And that shock will reverberate through regional basis relationships, including at the Waha Hub, which we expect to end 2021 much stronger than it is currently. Today, we begin a series that looks at Permian, as well as Gulf Coast, gas markets over the months and years ahead, highlighting findings from RBN’s new, Special Edition Multi-Client Market Study.

Sunday, 09/27/2020

Canadian gas production in 2019 turned lower for the first time in half a dozen years as very weak benchmark Canadian gas prices led to a sharp reduction in drilling and wellhead shut-ins. This year, higher prices, more drilling, and greater pipeline egress capacity were supposed to set the stage for a return of supply growth. Instead, production volumes have slipped further due to reduced drilling activity and, more recently, a spate of maintenance work. And even if there is some improvement in the next few months, annual average production looks to be on track for a second consecutive decline in 2020. But what about next year? Today, we take a closer look at the recent supply trends and whether there are any signs pointing to a production rebound in 2021.

Thursday, 09/24/2020

U.S. natural gas production in recent days has plunged more than 3 Bcf/d. While some Gulf of Mexico offshore and Gulf Coast production is still offline from the recent tropical storms, the bulk of these declines are happening in the Northeast, where gas production has dived 2 Bcf/d in the past week or so to about 30.2 Bcf/d, the lowest level since May 2019, pipeline flow data shows. Appalachia’s gas output was already down earlier in the month, as EQT Corp. shut in some volumes starting September 1. But with storage inventories soaring near five-year highs, a combination of maintenance events and demand constraints are forcing further curtailments of Marcellus/Utica volumes near-term. Today, we provide an update of Appalachia gas supply trends using daily gas pipeline flow data.

Wednesday, 09/23/2020

There’s no doubt about it: California’s decade-long efforts to expand the use of solar, wind, and other renewable energy and improve energy efficiency have enabled the state to significantly reduce its consumption of natural gas for power generation. But the Golden State’s rapid shift to a greener, lower-carbon electricity sector — and its push to shut down gas-fired power plants — has come at a cost, namely an increased risk of rolling blackouts, especially during extended heat waves in the West when neighboring states have less “surplus” electricity to send California’s way. The main problem is that while solar facilities provide a big share of the state’s midday power needs, there’s sometimes barely enough capacity from gas plants and other conventional generation sources to take up the slack when the sun sinks in the late afternoon and early evening. Today, we discuss recent developments on the power front in the most populous state, and what they mean for natural gas consumption there.

Tuesday, 09/22/2020

As U.S. natural gas spot and futures prices retreated in the past week, the price of gas at Appalachia’s Dominion South hub fell as low as $0.735/MMBtu, the lowest since fall 2017, before partially rebounding yesterday to about $1.10/MMBtu, according to the NGI daily gas price index. Moreover, the forwards market indicates sub-$1/MMBtu prices are in store for October as well. The regional supply hub didn’t weaken quite as much as prices at the national benchmark Henry Hub, which collapsed in recent days on demand losses — from cooler weather, storm-related power outages, and disruptions to LNG exports — and storage levels in the Gulf Coast region that are well above average and approaching peak capacity levels. The relative support for prices in the Northeast is in part due to a second round of production shut-ins by EQT Corp., which took effect September 1. But seasonal demand declines are underway; the Dominion Energy Cove Point LNG facility in Maryland just went offline for its annual fall maintenance, placing additional pressure on already-packed storage fields and takeaway pipelines; and pipeline maintenance events are reducing outflow capacity and curtailing production. Altogether, that signals more volatility ahead. Today, we provide an update on the fundamentals driving the Northeast gas market.