Sabine Pass

It’s shaping up to be an incredible year for U.S. LNG growth, with record levels of feedgas demand and exports along with progress on the regulatory front, as the Trump administration has cleared away hurdles that had previously stalled project development. Now, Cheniere Energy has announced a positive final investment decision (FID) on its Corpus Christi Midscale expansion. In today’s RBN blog, we take a closer look at the Midscale project and others that could move forward this year. 

Total U.S. LNG export capacity is around 12 Bcf/d, including the still-commissioning-but-nearly-complete Calcasieu Pass. About 13.5 Bcf/d of U.S. natural gas supplies, or feedgas, is required to produce that much LNG, but feedgas demand has averaged just 10.5 Bcf/d over the past week despite still-soaring global gas prices and an undersupplied global LNG market. Two U.S. terminals are currently offline: Freeport LNG, which has been out of service since an explosion and fire in June, and now Cove Point LNG, which shut for annual maintenance October 1. Beyond those outages, which have taken about 2.75 Bcf/d of demand out of commission, LNG feedgas volumes have been extremely volatile, swinging as much as 2 Bcf/d within a week. Don’t expect this to last, however — with winter approaching, the return of both Freeport and Cove Point on the horizon, and the full startup of Calcasieu Pass in sight, feedgas demand will likely rise to new heights and soon consistently top 13 Bcf/d. In today’s RBN blog we take a closer look at the recent volatility in LNG feedgas and the potential demand coming this winter.

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.

2019 was supposed to be a milestone year for U.S. LNG exports. And to a degree, it has been. Natural gas pipeline deliveries to liquefaction and export terminals have peaked above 6.5 Bcf/d in the past couple of weeks and averaged about 6 Bcf/d for that period, up nearly 2 Bcf/d from where they started this year and more than twice where they stood at this time a year ago. But the growth has come haltingly as under-construction projects have faced a number of setbacks and delays. Moreover, the longer-term, “second-wave” export projects still in the early stages of development and looking to pass “go” are facing challenges of their own, including global oversupply and collapsed margins. Today, we begin a short series providing an update on where U.S. LNG export demand and new projects stand.

With U.S. natural gas production levels near all-time highs and storage injections running strong, LNG exports will be a critical balancing item for the domestic gas market this year. Yet feedgas demand in recent months has been anything but stable; rather, it’s proving to be susceptible to volatility, driven by a combination of offshore weather conditions, maintenance events, start-up activity and global market conditions, among other factors. At the same time, timelines for the remaining 20 MMtpa (2.6 Bcf/d) of new liquefaction capacity still due online this year are moving targets as coastal weather, construction-related delays and other variables affect target completion dates. Today, we discuss highlights from our new Drill Down Report on the impacts of recent and upcoming LNG export capacity additions.

After a period of delays, commissioning activity at the newest U.S. LNG export terminals is poised to accelerate in the coming months, in turn bringing on incremental feedgas demand. Sempra’s Cameron LNG has said it’s ready to introduce feedgas to its fuel system and is awaiting federal approval. Meanwhile, liquefaction projects at Kinder Morgan’s Elba Island LNG and Freeport LNG terminals are gearing up to take feedgas in the next month or so. Feedgas deliveries to the operating export facilities in the past seven days have averaged 5.5 Bcf/d. These three projects alone are slated to add another 1.2 Bcf/d of incremental feedgas demand by July, bringing the total to 6.7 Bcf/d by then, if all goes well. In today’s blog, we continue examining the status and timing of LNG export projects in 2019, this time with a closer look at the Cameron, Elba and Freeport projects.

U.S. demand for LNG feedgas has picked up in recent weeks, posting a record high of 5.6 Bcf/d in late February and averaging more than 5 Bcf/d in March to date, as Cheniere Energy completed the fifth train at Sabine Pass and the first at Corpus Christi. That level is nearly 1 Bcf/d higher than last month and nearly double what it was at this time last year. But it’s just the start. Train 2 at Corpus Christi was approved for feedgas just yesterday and Kinder Morgan’s Elba Island project in Georgia just days before that. With about 30 MMtpa, or ~4.5 Bcf/d, of liquefaction and export capacity due online this year, feedgas deliveries are poised to surpass 9 Bcf/d by the end of the year, with nearly all of that incremental demand coming online along the Texas and Louisiana Gulf Coast. The pace of this demand growth over the course of the year will come down to how quickly the anticipated trains can complete construction and testing, the timing of which can depend on a whole host of factors, including the extent of the repairs or modifications that are needed along the way, the timing of regulatory approvals, or the timing of gas pipeline connections to supply the facilities. Today, we continue our series examining the status and timing of LNG export projects in 2019.