Massive LNG export terminals and shipments to Europe get all the attention these days, and for good reason. But there’s a lot more going on with U.S. LNG below the radar, and on a much smaller scale. Peak-shaving liquefaction plants to help gas-distribution utilities up north keep the lights on during high winter demand periods. Plants that make LNG for a wide variety of industrial, mining and oil-and-gas-production customers, and for LNG-powered trucks and ships — often to help reduce emissions and meet ESG goals. And there are a number of small liquefaction plants in the U.S. that export LNG to power-generation and industrial customers in the Caribbean and Mexico. In today’s RBN blog, we begin a short series on an often-overlooked but important market for U.S. natural gas.
We begin with some context for the U.S. LNG market. After peaking at about 60 Bcf/d in 1972, U.S. production of dry natural gas flat-lined at less than 55 Bcf/d (and as low as 44 Bcf/d) from 1975 through 2007, according to the Energy Information Administration (EIA), spurring the expectation that the country would soon need to start importing large volumes of LNG. Several large LNG import projects were advanced in the early 2000s, including Sabine Pass, Cameron and Freeport. The Shale Revolution changed all that, breathing new life into the U.S. energy sector and, with climate change and the global response to it, helping gas become the go-to “transition fuel” as the world shifts to lower- and zero-carbon sources of energy. Last year, dry gas production in the Lower 48 averaged a robust 93 Bcf/d — enough to meet domestic demand and provide an average of about 10 Bcf/d of feedgas to the half-dozen large liquefaction/LNG export terminals along the Gulf and East coasts. Now, with Russia’s invasion of Ukraine and Europe’s frantic efforts to wean itself off Russian gas, these large-scale LNG facilities are taking on even more significance as an energy lifeline of sorts to the European Union.
The small-scale LNG facilities and markets we will be discussing in this series are unlikely to make headline news in the Wall Street Journal or Financial Times — and, for a variety of economic and logistical reasons, converting natural gas to LNG and trucking it away will remain a solution best suited for smaller-scale developments, as opposed to pipeline projects, which are best for larger scale and longer distance. In other words, small-scale LNG could not even begin to alleviate the impending gas pipeline takeaway constraints threatening producers in Marcellus/Utica and the Permian. However, as we’ll get to next, these LNG facilities and markets are important — even critically so — in their own ways.
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