All Down the Line - U.S. LNG Export Demand Growth to Slow in 2018

With Lower-48 natural gas production at record highs and averaging more than 5.0 Bcf/d higher than this time last year, LNG export demand will be all the more critical this winter and the rest of 2018 in order to balance the U.S. gas market. Deliveries to Cheniere Energy’s Sabine Pass LNG facility (SPL) are above 3.0 Bcf/d. Dominion Energy’s Cove Point LNG is due to add nearly 0.8 Bcf/d of export capacity and begin exporting commissioning cargoes any day now. Two other projects — Elba Island LNG and Freeport LNG — are due online before the end of 2018, while another high-capacity project, Cameron LNG, faces delays. These facilities will increase baseload demand for gas in the new year, but will it be enough, and how will it impact gas pipeline flows upstream? Today, we provide an update on the timing and potential impacts of new export LNG capacity over the next year.

In less than two years, LNG exports have quickly become a staple of the U.S. gas market, helping to balance oversupply conditions and keep the storage inventory in check. This new source of demand first came on in early 2016, at a time when gas production in the Lower 48 was contracting. But in 2017, the narrative changed. As we discussed in Signs, Signs, Everywhere a Sign, production has surged to new heights in recent months, with volumes hitting a record 76.2 Bcf/d in just the last 30 days and averaging 75.5 Bcf/d in that period. Moreover, as we detailed in Fill Me Up Buttercup, there’s more than 6.0 Bcf/d of pipeline takeaway capacity set to come online from the Marcellus/Utica producing region this winter, all but guaranteeing that production will continue growing through 2018. So, now more than ever, the market is in dire need of consistent demand growth.

LNG exports have been that for the last couple of years, as illustrated in Figure 1 by the impressive trajectory of deliveries to SPL since its first export cargo back in February 2016. SPL currently receives gas from three interconnects:  Cheniere’s Creole Trail Pipeline (CTPL, blue), Kinder Morgan’s Natural Gas Pipeline Co. (NGPL, orange layer) and, since late summer, also directly from Williams’ Transco Pipeline (gray layer). (See Just Can’t Make No Connection and Toe bone connected to the foot bone for more on how those flows have evolved.)

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