The international spot price for liquefied natural gas (LNG) has been steady-as-she-goes the past few months, within a few dimes of $5.50/MMBtu, but that stability belies the upheavals the LNG industry continues to experience. The old paradigm of long-term contracts and milk-run deliveries from supplier to buyer is breaking down. New Australian and U.S. liquefaction capacity is coming online fast and furious, exacerbating the global LNG supply glut, and Qatar — the world’s largest LNG supplier, just announced plans to increase its output by 30%. With LNG readily available and priced to sell, new LNG buyers are entering the fray, developing natural gas-fired power plants that will be fueled by imported LNG. What does all this mean for the next wave of U.S. liquefaction projects and for natural gas producers in the Marcellus/Utica and the Permian? Today we continue our look at the topsy-turvy LNG sector.
For several years now, power generators and other major energy users in the Caribbean have been working to shift from diesel or fuel oil to alternative fuels — mostly natural gas delivered by ship as liquefied natural gas (LNG), but also propane. A few significant projects have advanced, and new infrastructure to receive LNG and propane has been put in place to support additional fuel imports into the region. But other projects have been delayed or even scrapped because of financial or regulatory troubles. Today we update the laid-back region’s efforts to wean itself off diesel- and fuel-oil-fired power.
The contiguous U.S. natural gas market is on its way to having its second major LNG export terminal and a new source of demand in the Northeast region by the end of the year. Dominion’s Cove Point liquefaction project, located on the Chesapeake Bay in Calvert County, Maryland, last month received approval from the Federal Energy Regulatory Commission (FERC) to introduce fuel gas, signaling the start of commissioning activities, a precursor to start-up activities for the liquefaction train itself. Dominion also last November applied for permission from the Department of Energy to export up to 250 Bcf of LNG during pre-commercial operations starting as early as fourth-quarter 2017, and is awaiting a response. Once operational, the facility, which is located within just a few hundred miles of the Marcellus/Utica shales — will have access to one of the primary southbound pipeline corridors for Marcellus/Utica takeaway capacity and add nearly 0.8 Bcf/d of demand to the Northeast gas market. Today we provide a detailed look at the Cove Point LNG facility.
In only three years, the international liquefied natural gas (LNG) market has undergone a major transformation. The old order, founded on long-term, bilateral contracts with LNG prices linked to crude oil prices, is being replaced by a more-fluid, more-competitive paradigm. That’s good news for LNG buyers, who are benefiting from a supply glut and lower LNG prices—the twin results of slower-than-expected demand growth in 2014-15 and the addition of several new liquefaction/LNG export facilities in Australia and the U.S. But the new paradigm poses a challenge for facility developers: How do they line up commitments for new liquefaction/LNG export capacity that will be needed a few years from now in a market characterized by LNG oversupply and rock-bottom prices? Today we begin a two-part series that considers the hurdles developers face and which types of projects may have the best prospects.
Last year was the best for global LNG demand growth since 2011, and a combination of ample LNG supply, new buyers and relatively low prices suggest that demand will continue rising at a healthy clip in 2017. That’s good news not only for LNG suppliers, but for natural gas producers and for developers planning the “second wave” of U.S. liquefaction/LNG export projects. Before those projects can advance, the world’s current—and still-growing—glut of LNG needs to be whittled down, and nothing whittles a supply glut like booming demand. Today we discuss ongoing changes in the LNG market and how they may well work to the advantage of U.S. gas producers and developers.
Northeast producers are about to get a new path to target LNG export demand at Cheniere Energy’s Sabine Pass LNG terminal. Cheniere in late December received federal approval to commission its new Sabine Pass lateral—the 2.1-Bcf/d East Meter Pipeline. Also in late December, Williams indicated in a regulatory filing that it anticipates a February 1, 2017 in-service date for its 1.2-Bcf/d Gulf Trace Expansion Project, which will reverse southern portions of the Transcontinental Gas Pipe Line to send Northeast supply south to the export facility via the East Meter pipe. Today we provide an update on current and upcoming pipelines supplying exports from Sabine Pass.
There’s good reason to believe that the international LNG market has turned a corner, with demand and LNG prices on the rise and with a number of new LNG-import projects being planned. That would be good news for U.S. natural gas producers, who know that rising LNG exports will boost gas demand and support attractive gas prices. It also would help to validate the wisdom of building all that liquefaction/LNG export capacity now nearing completion. Today we look at recent developments in worldwide LNG demand and pricing and how they may signal the need for more LNG-producing capacity in the first half of the 2020s.
Every day, crude oil producers on Alaska’s North Slope re-inject nearly 7.8 Bcf of natural gas into their wells, enough gas to supply the entire U.S. West Coast—California, Oregon and Washington State. If only there were some way to monetize that gas supply, to move it to market. The problem is that there isn’t, at least in today’s gas/LNG market, which is characterized by ample supply and relatively low prices. This same market also favors infrastructure projects that are simple and low-cost; no one wants to make multibillion-dollar commitments when natural gas prices and margins are so low. Today we conclude our series on the tough times ahead for Alaska’s energy sector with a look at the state’s vast natural gas reserves and the challenges associated with tapping them.
Some 3.2 Bcf/d of new LNG export capacity will be coming online along Texas’s Gulf Coast over the next two and a half years, and 8 Bcf/d of new natural gas pipeline capacity is under development to transport vast quantities of gas through Texas to the Mexican border. But while gas-export opportunities abound, Texas gas production is down, mostly due to a big fall-off in Eagle Ford output, so exporters will need to pull gas from as far away as the Marcellus/Utica to meet their fast-growing requirements. That will flip Texas from a net producing region to a net demand region once when you factor in exports that will flow through the state. This profound shift will put extraordinary pressure on Texas’s unusually complex network of interstate and intrastate pipeline systems, which will need to be reworked and expanded to deal with the new gas-flow patterns. It also will have a significant effect on regional gas pricing––putting a premium on Texas prices. These issues and more are addressed in RBN’s latest Drill Down Report, highlights of which we discuss in today’s blog.
Intrastate natural gas pipelines in Texas reach far and wide, and can transport extraordinary volumes of gas. The problem is, the traditional supply/demand dynamics that spurred the development of all that pipe decades ago are being up-ended by burgeoning Marcellus/Utica production headed to the Gulf Coast and the demand-pull of gas to planned LNG export terminals along the Texas coast and to Mexico. Lone Star State pipelines that for years have flowed north and east to the Houston Ship Channel and beyond now must flow south and west. Today, we continue our review of efforts to rework and expand key elements of Texas’s intrastate gas pipeline network to meet growing export needs, this time with a look at plans by Enterprise Products Partners.
Providing the capacity to transport Marcellus/Utica natural gas to and through the state of Texas to LNG export terminals and to Mexico will require pipeline reversals, new pipe and other enhancements along a combination of interstate and intrastate lines. In many ways, the long-distance part of the job––the reversal of large-diameter pipelines between the Northeast and the Lower Mississippi Valley––is the more straightforward; the greater challenge will be reworking the complicated pipeline networks between the Texas/Louisiana state line and the U.S./Mexico border. Today we review Texas pipeline projects being planned to allow increasing southbound flows of Northeast gas.
The increasing availability of LNG at low and relatively stable prices, combined with the ability to expedite the installation of LNG receiving/regasification infrastructure, has the potential to spur faster growth in global LNG demand than many have been expecting. If that happens, the current––and still growing––glut in worldwide liquefaction capacity could shrink in a few years’ time, and a “second wave” of U.S. liquefaction/LNG projects could start coming online by the mid-2020s. Today, we conclude our series on U.S. LNG exports with a look at how low, stable LNG prices may turn the market toward supply/demand balance.
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.
Developing a multibillion-dollar liquefaction/LNG export project takes perseverance and patience––and having good luck wouldn’t hurt. The “first wave” of U.S. projects is now cresting; the first two liquefaction “trains” at Cheniere Energy’s Sabine Pass LNG facility are essentially complete, and 12 other trains are under construction and scheduled to come online in the 2017-19 period. But what about the “second wave” of projects that was supposed to be arriving soon thereafter? Today we continue our series on the next round of U.S. LNG projects with a run-through of the projects themselves and a look at how (despite the current market gloom) there is at least some cause for optimism that a few may get built by the early 2020s.
The “first wave” of liquefaction/LNG export projects in the U.S. is cresting. Two new liquefaction trains in Louisiana are already producing liquefied natural gas, and a dozen other trains are under construction and scheduled to begin commercial operation in the Lower 48 over the next three years. The problem is, these multibillion-dollar facilities––planned when LNG market dynamics were much more favorable––are “rolling in” as the global market faces a supply glut, weak LNG demand growth, and low prices. Today, we begin a series on the next round of U.S. LNG projects and how soon market conditions might improve enough to justify building them.