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.
We said earlier this year in Let It Flow that, with U.S. natural gas production levels near all-time highs and storage injections running strong, LNG exports were bound to be a critical balancing item for the domestic gas market this year. And that they have been, especially given the relatively mild summer weather, which has dampened gas demand growth from the U.S. power generation sector. In fact, demand from LNG exports has been the single biggest driver of demand growth this injection season to date (April through August). While power demand managed to set record highs in most months, as well as on a seasonal average basis this summer, those gains have been relatively modest, up just 0.4 Bcf/d year-on-year this injection season, and overall net U.S. consumption has grown little more than 1 Bcf/d total year-on-year for that same period. By comparison, gas pipeline deliveries to the LNG terminals for liquefaction and export have averaged 5.3 Bcf/d this injection season so far (again, April through August), up 2.1 Bcf/d (66%) year-on-year. (Exports to Mexico also are up slightly — 0.3 Bcf/d — year-on-year.)
Market expectations for LNG exports heading into 2019 were bullish, with several new liquefaction trains targeting completion in the first and second quarters, including trains at brand-new facilities. But a combination of weather-related and other construction delays, as well as hiccups during testing and commissioning, have postponed some of the export capacity that was to be online and taking feedgas consistently by now. That’s on top of the demand loss from seasonal maintenance work at Cheniere Energy’s Sabine Pass LNG, which already had five liquefaction trains regularly consuming feedgas coming into 2019.