Calcasieu Pass

U.S. LNG was poised for a year of massive growth in 2024, with new terminals and expansions set to cause feedgas to rise and commercial success in the years following Russia’s 2022 invasion of Ukraine set to spur further LNG project development. Instead, construction delays have pushed projects back and feedgas in the past three months has averaged about 500 MMcf/d less than the same period last year. Meanwhile, the Biden administration’s pause on non-free trade (FTA) export licenses, lengthy delays to the Federal Energy Regulatory Commission (FERC) authorization process and the resulting legal challenges to both have brought project development to a near-standstill. In today’s RBN blog, we look at current U.S. LNG feedgas demand and how construction delays have shifted expectations for the next few years. 

Venture Global reached a final investment decision (FID) on Plaquemines LNG Phase 1 in March 2022, making it the first new LNG project to get the green light post-COVID and kicking off a massive expansion period for U.S. LNG. In fact, more than 61 million tons per annum (MMtpa) of new U.S. LNG capacity has been given the go-ahead in the past 17 months, including the full 20-MMtpa Plaquemines LNG project from Venture Global, plus projects from Cheniere, Sempra and, most recently, NextDecade’s Rio Grande LNG. Even if no new LNG projects are sanctioned after this — which seems unlikely, given the progress seen on some pre-FID projects — the U.S. will have the capacity to export 167.5 MMtpa, or more than 22 Bcf/d, by later this decade. This unprecedented level of buildout continues to be dominated by our “Big Three” of U.S. LNG — Cheniere, Sempra and Venture Global — which not only already operate LNG export terminals in the U.S. and have projects currently under construction, but all still have more capacity under development and working toward eventual FIDs. In today’s RBN blog, we wrap up our series with a look at the newest member of the Big Three, Venture Global, its projects under development and the controversy surrounding the commissioning of Calcasieu Pass LNG.

Global natural gas prices went through the roof in December, and while prices are back down from those highs, they remain incredibly strong compared to years past and the economics for U.S. LNG exports are riding high. LNG exports have been in the money for quite some time, but feedgas deliveries to U.S. export terminals throughout the spring and summer of 2021 were somewhat lackluster as maintenance and operational issues at terminals and nearby pipelines kept feedgas from hitting its full potential. Gas deliveries to those terminals began climbing in the fall, first back to full utilization levels, and then beyond. Much of the record feedgas demand has been from commissioning activity at Sabine Pass Train 6, which produced its first LNG in December and is on track to begin full service early this year. But beyond that, operators have been pushing the existing fleet of terminals to operate at peak levels and produce additional cargoes, likely for sale in the spot market or on short-term contract, an extremely profitable endeavor given the prices in Europe, where most if not all destination-flexible cargoes have headed. In today’s RBN blog, we look at what’s driving LNG feedgas demand to its recent highs and how much higher it could go.

The U.S. natural gas market’s exposure to global gas and LNG markets has come into sharp focus in recent days. A gas supply crunch in Europe and scant LNG cargoes have roiled the international markets and kicked competition into overdrive. European natural gas and Asian LNG prices are at record highs and locked in a race to the top. The U.S. gas market has been relatively buffered from the full extent of the panic-driven premiums enveloping European and Asian markets, constrained primarily by its limited ability to help meet international demand. In other words, the U.S.’s LNG export capacity ceiling is likely the only thing reining in Henry Hub prices from following European and Asian gas/LNG prices to the moon. As explosive as Henry Hub futures are these days, if not for the capacity constraint, they would be much higher. That ceiling is about to get a little higher, however, as two liquefaction projects — Cheniere Energy’s Sabine Pass Train 6 and Venture Global’s Calcasieu Pass — get ready to export LNG from U.S. shores this winter, amid what’s already the most bullish Lower 48 gas market in years. In today’s RBN blog, we detail the timing and demand implications of these two projects.

The year-on-year gain in U.S. LNG feedgas demand has been the single biggest factor behind the soaring natural gas prices and storage shortfall this year. And there is more of that demand on the horizon. Cheniere Energy’s Sabine Pass Train 6 and Venture Global’s new Calcasieu Pass facility are due to start service in the first half of 2022. However, feedgas volume is likely to ramp up ahead of the new year as both projects progress through the commissioning phase and aim to export their first commissioning cargoes before the end of the year. How soon could that incremental feedgas demand show up? Getting a handle on the timing requires an understanding of how a liquefaction plant works and the various steps of the commissioning process. Today, we start a short series on what’s involved when bringing a liquefaction plant online and what that can tell us about the timing of incremental feedgas flows this fall/winter.

The cascade of LNG export project news continues. In the past week, yet another “second-wave” U.S. LNG export project — NextDecade’s Rio Grande LNG — cleared FERC’s environmental review process. That follows news of three other projects that received their environmental approvals this month; plus two other projects — Tellurian’s Driftwood LNG and Sempra’s Port Arthur LNG — got final FERC authorization to construct their facilities, should they make the financial commitment to proceed; and, finally, plans for a brand new export terminal, Venture Global’s Delta LNG, were unveiled. All in all, there are more than 20 announced projects totaling 235 MMtpa (~35 Bcf/d) that are looking to catch the second wave of U.S. LNG exports in the next decade. The timing of their regulatory approvals and final investment decisions will determine, in part, when this next wave — or shall we say tsunami — of export demand will materialize. Today, we wrap up our second-wave LNG project update series with a look at the progress made by some of the remaining projects that we’re tracking.

2019 is slated to be a watershed year for U.S. LNG export projects vying to catch the second wave — the first wave being the slew of liquefaction trains already operational or in the process of being commissioned or constructed. As expected, regulatory and commercial activity has heated up around the two dozen or so longer-term proposals to add liquefaction capacity along the U.S. coastlines over the next decade. Last week, the Federal Energy Regulatory Commission (FERC) approved two of those projects — Tellurian’s Driftwood LNG and Sempra’s Port Arthur LNG — and several others, including Driftwood and NextDecade’s Rio Grande LNG, also have made progress on the commercial front. Many of these projects are targeting a final investment decision (FID) this year. Today, we continue a series highlighting the second-wave projects’ latest developments.

Each of the “second wave” liquefaction/LNG export projects along the U.S. Gulf Coast now closing in on a Final Investment Decision (FID) believes it has an edge — that special something that will enable it to cross the finish line ahead of its competitors. Things like a prime location, access to an existing network of natural gas pipelines, lower capital costs, or going with smaller “midscale” liquefaction trains instead of traditional big ones. Some tout the experience and depth of their executive teams, while others claim that thinking outside the box is key. Time will soon tell which two or three (or four) projects advance to FID. Today, we continue our series on the next round of liquefaction/LNG export terminals “coming up” with a look at NextDecade’s plan for the Rio Grande LNG project in Brownsville, TX, which would export large volumes of Permian and Eagle Ford gas.

The race is on to be the first to reach a Final Investment Decision (FID) for the next round of U.S. liquefaction/LNG export terminals along the Gulf Coast. And like the Kentucky Derby, being first — or, at worst, second or third — is a do-or-die proposition, because only a very small number of these projects are likely to line up the multibillion-dollar commitments needed to push them over the FID line. The tried-and-true approach of LNG project financing has been to secure a stack of long-term Sales and Purchase Agreements (SPAs) from international LNG trading companies or huge overseas utilities, and that’s the tack being taken by Venture Global LNG, which is developing two projects near the Louisiana coast that, if built, would consume a total of nearly 4 Bcf/d of U.S. natural gas. Today, we continue our series on the next round of liquefaction/LNG export terminals “coming up” with a look at Venture Global’s Calcasieu Pass and Plaquemines projects.