Over, Under, Sideways, Down - Energy Transfer's Gulf Run Pipeline Expands Critical Louisiana LNG Feedgas Corridor

If pipeline-constrained Haynesville Shale producers’ New Year’s resolution was to grow volumes, they just got a big boost: Energy Transfer recently placed in service its new Gulf Run Transmission natural gas pipeline in Louisiana, increasing north-to-south capacity in the state by 1.65 Bcf/d. It’s the first of several pipeline projects due online in 2023 — and among others proposed for subsequent years — that will be critical for debottlenecking the Louisiana pipeline network and connecting Haynesville and other gas production volumes to LNG export projects vying for feedgas supply on the Louisiana coast. U.S. LNG developers are in a race to capitalize on the tight global LNG market and finalize terminal plans, with much of the next wave of liquefaction and export capacity additions planned for the Louisiana coast which may, in time, help alleviate energy security concerns, particularly across the pond in Europe. If these pipeline projects don’t get built on time, the resulting supply shortage in southern Louisiana would not only wreak havoc on Henry Hub and the domestic gas market but would reverberate around the globe. Gulf Run’s in-service is good news for at least one facility: the under-construction Golden Pass LNG, which is the anchor shipper on the pipeline and due to begin commissioning later this year. In today’s blog, we look at what the new capacity could mean for flows and production growth in the short- and long-term.

As we’ve said in recent blogs — (LNG) Will Never Do Without You and Where It’s At — one of the biggest uncertainties — and risks — to the next wave of U.S. LNG export projects is the availability of feedgas supply when and where it will be needed. Energy reliability problems in Europe unleashed demand for North American LNG export projects, and the bulk of those are located along a less-than-100-mile stretch of coastline straddling the Texas-Louisiana border. That, in turn, has spurred activity and growth in the Haynesville Shale in Louisiana. Haynesville output ballooned to record highs and led the overall rebound in Lower 48 gas production in recent months. Looking forward, in RBN’s Mid-case scenario (assuming the current futures curve and no pipeline constraints), the Haynesville would grow by 3.8 Bcf/d over the next three years.

The trouble, as we’ve laid out in our Down by the Water series, is that the pipeline network to move gas from the Haynesville and other basins south to the export supply hubs in southern Louisiana — what RBN calls the Central Corridor — has been running chock-full and, much like in Appalachia, north-to-south flows in the Bayou State are increasingly dependent on pipeline expansions. So, the key to unlocking U.S. LNG export growth will be the pace of pipeline expansions and how well they line up with export capacity additions as they come online. A number of debottlenecking projects have come online in Louisiana over the past two years. But a lot more will be needed, and — it can’t be said enough — timing will be everything.

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