liquefaction capacity

The bulk of the second wave of U.S. LNG export projects will be situated along a small stretch of the Gulf Coast, from Port Arthur at the Texas-Louisiana border to the Mississippi River in southeastern Louisiana. Three of these projects — Golden Pass LNG, Port Arthur LNG and Plaquemines LNG — are under construction there and will add nearly 7 Bcf/d of new gas demand by 2028, and others could reach a final investment decision (FID) in the coming months or years. That’s prompted a frenzy of natural gas pipeline projects vying to serve this growing demand center, whether by moving incremental supply into the area or providing “last mile” delivery to the terminals. These pipeline expansions — and how well the incremental capacity, geography and timing align with liquefaction capacity additions — will drive the pace of overall gas demand growth and how the Lower 48 gas market will balance in the coming years. In today’s RBN blog, we discuss highlights from our new Drill Down Report detailing the slew of announced pipeline projects targeting LNG exports from the Port Arthur, TX/Louisiana region.

Cancellations of U.S. LNG cargoes are starting to take a toll on Lower-48 natural gas demand. Feedgas flows to U.S. terminals last week fell to as low as 5.76 Bcf/d, down from the daily peaks above 9 Bcf/d seen as recently as April and the lowest since October 2019. While some of the slowdown may be attributable to domestic outages or maintenance on feeder pipes — or short-lived marine channel weather conditions — the bulk of it is a precursor to the first big round of cancellations by offtakers for June liftings. This, as COVID-related demand destruction and the resulting supply glut in the past month have collapsed what already were weak economics for exporting U.S. LNG to Europe and Asia, wiping out offtakers’ margins for delivery into those markets. Nevertheless, many cargoes will continue to move. What drives offtakers’ decision of whether to lift or cancel cargoes? Today, we wrap up a short series looking at the market and logistical dynamics forcing cancellations, as well as some of the mitigating factors that could prop up cargo liftings more than you’d expect in the current environment.

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.

With liquefaction capacity and supply of liquefied natural gas on the rise and LNG demand flat, prices for super-cooled, liquefied gas are low and may well stay low into the early 2020s. That’s a concern for LNG suppliers, who (like all suppliers) would prefer it if demand was soaring and supply was a little tight. There are some rays of hope, though, in what many have seen as a gloomy time for the LNG sector. After all, with spot LNG prices below $5/MMBtu (far lower than they were 30 months ago) and ample supplies of LNG available, a growing list of nations are looking either to become LNG importers or to significantly expand their LNG imports. Today, we continue our review of the LNG market with a look at the new demand that may be spurred by supply surpluses and low prices.