Cheniere Energy

After about four weeks offline for modifications and maintenance, Cheniere’s Sabine Pass liquefaction terminal in Cameron Parish, Louisiana began accepting nominal deliveries of feed gas starting last Friday, indicating the facility is due to ramp up to capacity any day now. Since the first export cargo in February, about 130 Bcf, or 0.6 Bcf/d, of natural gas has been delivered to the terminal. While those aren’t quite game-changing volumes yet, deliveries just prior to the outage were averaging more in the vicinity of 1.2 Bcf/d and indications are that deliveries could ramp up to more than 1.0 Bcf/d in short order with the restart and grow to more than 2.0 Bcf/d by the end of 2017. It’s clear that LNG exports are quickly becoming a prominent and inescapable feature of the U.S. natural gas market. Today, we wrap up our series on the growing impact of LNG exports on the U.S. supply/demand balance.

It’s been a volatile summer for U.S. natural gas.  The CME NYMEX front month contract spiked from $1.96/MMBtu in late May to $2.99 on July 1, up more than 50% in just over a month.  Since then the price has headed mostly south, closing at $2.62/MMBtu on Tuesday, down $.37/MMBtu from its summer high a few weeks ago.  As often is the case, the primary culprit has been weather.  But for the first time, a new factor is starting to have an impact: LNG exports.   During August, approximately 30 Bcf of gas will likely flow into Cheniere Energy’s Sabine Pass for now-routine LNG exports from Train 1 and the initial volumes needed for the start-up of Train 2.  The more recent decline in gas prices just happened to follow the announcement that the entire Sabine Pass LNG facility will be shut down for several weeks starting next month for maintenance and to address a design issue.   Was LNG a factor in the price decline?  Hard to say.  We may get a better sense of the market impact of LNG exports when the plant starts back up.  At that point even more gas –– up to 1.25-1.5 Bcf/d in total –– could be sucked out of the market, possibly taking a 125-Bcf bite out of supply by the end of this year.  The gas market has changed.  From here on out, you won’t be able to understand the U.S. natural gas market without a solid grasp of LNG export dynamics.    Today, we begin a two-part series on how international demand for U.S.-sourced LNG will have an increasing effect on gas supply, demand and price.

The start-up of Sabine Pass, the first liquefied natural gas (LNG) export terminal in the Lower 48, is only months away, and the complicated gas-delivery logistics behind the project are coming into focus. Surely one of the biggest challenges has been assembling the long-haul pipeline capacity needed to move several billion cubic feet of gas a day (Bcf/d) to Sabine Pass from deliberately diverse sources as far away as the Marcellus/Utica. After all, the nation’s pipeline network was initially designed to move gas from the Gulf Coast to the Northeast and Midwest, not vice versa. Today, we continue our look at the challenges of securing and moving huge volumes of gas to LNG export terminals, the emerging epicenters of U.S. gas demand.