New U.S. liquefaction trains and export terminals coming online are entering an increasingly oversupplied, lower-priced global market. Even so, domestic LNG exports have continued to climb with each new train that is commissioned and commercialized. Feedgas deliveries to the terminals hit an all-time high well above 7 Bcf/d this past week and have stayed up there the past several days. That’s because more than 90% of the operating or commissioning liquefaction capacity is underpinned by long-term Sales and Purchase Agreements (SPAs) that keep cargoes flowing. Planned facilities still under construction are contracted at a similar level, and we expect that to keep U.S. LNG exports on a growth trajectory that’s in line with the commissioning and construction schedules of new plants, to a large extent regardless of international price trends. Today, we continue a series on U.S. LNG export cargoes and destinations, this time with a focus on the existing capacity contracts for operational and commissioning terminals.
Posts from Lindsay Schneider
U.S. LNG exports have climbed from zero to about 6 Bcf/d in less than four years. This year to date alone, three new liquefaction trains have come online at three different terminals with an additional train at Freeport LNG and Elba Liquefaction’s first four mini-trains in the commissioning process. The completion of these and other projects around the globe, particularly in Australia, have led to an oversupplied global market, made worse this year by a mild winter and high natural gas storage levels in Europe, and nuclear restarts and slowing demand growth in Asia. These dynamics sent international prices spiraling downward in recent months. Then, in September, prices briefly spiked up as regulatory news out of Europe suggested higher global gas demand. In the midst of all this market turmoil, U.S. export cargoes have remained unfazed. But the shifting fundamentals have played a role in where U.S. cargoes ultimately end up. Today, we begin a series looking into how liquefaction capacity contracts and international prices affect cargo destinations from U.S. LNG terminals.
Ten weeks after an explosion crippled a key natural gas takeaway route out of the Marcellus/Utica, the capacity finally has been fully restored. Texas Eastern Transmission two days ago said it’s lifting all restrictions on the affected section of pipe. The outage began on January 21 and partial service resumed eight days later, but TETCO’s Northeast production receipts during the event averaged about 700 MMcf/d lower than usual and the line’s flows to the Gulf Coast were cut by 30-40%. That, along with two severe polar-vortex periods in January that overlapped with the outage, caused a reshuffling of flows across other pipelines in the region. Today, we wrap up this series with a look at the implications of the outage on the Northeast gas market and what to expect now that it’s ended.
The second wave of North American LNG export projects is officially underway. LNG Canada took final investment decision (FID) last October and would be the first large-scale LNG export facility in Canada. Golden Pass followed in February, marking the beginning of the next round of LNG export build on the U.S. Gulf Coast. Sabine Pass Train 6 is expected to get the green light any day, and at least eight more projects are targeting FID this year. But how likely are these projects to go ahead? And what exactly does it take for a project to reach that financial milestone? Today, we begin a two-part blog series on the factors affecting U.S. and Canadian LNG export projects’ prospects for taking FID and our view on the projects making progress towards joining the second wave of LNG exports.
In a world where Marcellus/Utica natural gas supplies and Gulf Coast gas demand are increasingly interdependent, what would happen if flows along a critical route connecting the two regions were disrupted? The market caught a glimpse of that on January 21, when an explosion on Texas Eastern Transmission’s 30-inch line in Noble County, OH, shut down flows through its Berne compressor, which serves as a key gateway for Gulf Coast-bound gas out of Appalachia. Partial service was restored a few days later, but a chunk of the capacity remains offline as repairs are completed, and southbound volumes are running at 60% of what they were prior to the outage. Not too long ago, an outage severing Northeast producers’ access to a major takeaway route to the Gulf would have hammered Northeast supply prices, even during the peak winter demand months. But as expansion projects have vastly improved pipeline connectivity within Appalachia and takeaway capacity out of the region, they’ve transformed how some of those legacy long-haul pipelines function and even the role they play in the market. The TETCO outage provides a glimpse into what that will mean for the Northeast and its downstream markets. In today’s blog, we begin a series looking at the implications of a well-connected Marcellus/Utica, starting with a recap of the TETCO event and its immediate impacts on southbound flows.