The United States has become the world’s largest exporter of liquefied natural gas (LNG) as supplies to energy-poor buyers in Europe and Asia have increased. In the current year, five developers signed more than 20 long-term agreements to supply more than 30 million tons/year of LNG or approximately 4 Bcf/d to energy-poor buyers in Europe and Asia.
Recently, LNG giant Cheniere Energy Inc.(NYSE: LNG) revealed that it is the most active year for contraction since 2011. Meanwhile, volatile spot prices and deteriorating supply prospects have prompted importers to rush to negotiate long-term deals as they attempt to lock in prices. According to a report by the Oil and gas journal10-year LNG contracts are currently priced at ~75% above 2021 rates, with tight supplies expected to persist as Europe aims to boost LNG imports.
Unfortunately, while the United States is the world’s largest backlog in nearly-turn-key liquefied gas projects, collection restrictions, including limited pipeline capacity, remain the biggest hurdle to industry expansion.
In the Appalachian Basin, the country’s largest gas-producing region with production exceeding 35 Bcf/d, environmental groups have repeatedly halted or delayed pipeline projects and limited further growth in the Northeast. This leaves the Permian Basin and the Haynesville Shale to take on much of the LNG export growth forecast. Indeed, EQT Corp.(NYSE:EQT) CEO Toby Rice recently acknowledged that the Appalachian pipeline’s capacity has “hit a wall.”
Analysts at East Daley Capital Inc. have predicted that US LNG exports will grow to 26.3 Bcf/d by 2030 from current levels of nearly 13 Bcf/d. For this to happen, the analysts say an additional 2-4 Bcf/d of takeout capacity must come online at the Haynesville between 2026 and 2030.
“This assumes significant gas growth from the Permian and other associated gas games. Any opinion where oil prices fall enough to slow that activity in the Permian and you will need gas from more gaseous basins even moresay the analysts.
US pipeline companies to watch
According to FERC, four LNG projects are currently under construction in the US, another 12 have been approved by federal regulators and four more have been proposed for a total of 40 Bcf/d of potential LNG exports.
The crucial Permian Basin is preparing to unleash a torrent of gas and gas projects to keep the exploding LNG and wet. demand for gas. Energy transfer LP (NYSE: ET) is looking for build the next big pipeline to transport natural gas production from the Permian Basin. The company is also working on the Louisiana-based Gulf Run pipeline, which will transport gas from the Haynesville Shale in Texas, Arkansas and Louisiana to the Gulf Coast.
Energy Transfer is expected to report second quarter earnings on August 3, 2022. The consensus EPS forecast for the quarter, based on 5 analysts according to Zacks Investment Research, is $0.28 compared to $0.20 for the corresponding period last year.
In May, a consortium of oil and natural gas companies: WhiteWater Midstream LLC, EnLink Midstream (NYSE:ENLC), Devon Energy Corp. (NYSE: DVN) and MPLX LP (NYSE: MPlX) announced that they had reached a Final Investment Decision (FID) to proceed with construction of the Matterhorn Express Pipeline after having made sufficiently firm transport arrangements with shippers.
According to the press release, ”The Matterhorn Express pipeline is designed to transport up to 2.5 billion cubic feet per day (Bcf/d) of natural gas through approximately 490 miles of 42-inch pipeline from Waha, Texas, to the Katy area near Houston, Texas. Supply for the Matterhorn Express pipeline will come from multiple upstream connections in the Permian Basin, including direct connections to processing facilities in the Midland Basin via a branch line of approximately 75 miles, as well as a direct connection to the 3.2 Bcf/ d Agua Blanca Pipeline, a joint venture between WhiteWater and MPLX.”
The Matterhorn is expected to be commissioned in the second half of 2024, pending regulatory approvals.
Christer Rundlof, CEO of WhiteWater, praised the company’s collaboration with the three pipeline companies in developing “incremental gas transport from the Permian Basin as production in West Texas continues to grow.” Rundlof says Matterhorn will take care of “premium market access with superior flexibility for shippers in the Permian Basin, while playing a critical role in minimizing scaling volumes.”
Matterhorn joins a growing list of pipeline projects designed to capture growing volumes of Permian supplies and direct them to downstream markets.
WhiteWater unveiled plans to Whistler Pipelinecapacity by about 0.5 Bcf/d, up to 2.5 Bcf/d, with three new compressor stations.
MPLX has several other expansion projects under construction. The company says it expects to complete construction of two processing plants this year and recently made a final investment decision to expand its Whistler Pipeline.
Also in May, Kinder Morgan Inc. (NYSE: KMI) subsidiary launched an open season to gauge shippers’ interest in expansion the 2.0 Bcf/d Gulf Coast Express Pipeline (GCX).
KMI already has a binding open season for the Permian highway pipeline (PHP), already a foundation charterer for half of the planned expansion capacity of 650 MMcf/d.
In an effort to increase LNG exports to the European Union to avoid an energy crisis during Russia’s war against Ukraine, the US Department of Energy has authorized additional LNG export from the planned Golden Pass LNG Terminal in Texas and the Magnolia LNG Terminal in Louisiana.
Jointly owned by Exxon Mobil (NYSE: XOM) and Qatar PetroleumThe $10 billion Golden Pass LNG export project is expected to become operational in 2024, while Magnolia LNG, owned by Glenfarne Group, will come online in 2026. The two terminals are expected to produce more than 3 billion cf/day of natural gas, although Magnolia has yet to sign contracts with customers.
Previously, US LNG developers were unwilling to build self-financed liquefaction plants not insured by long-term contracts from European countries. However, the war in Ukraine has exposed Europe’s soft underbelly and the harsh reality is forcing a rethink of their energy systems. For example, Germany, Finland, Latvia and Estonia have recently expressed the wish to proceed with new LNG import terminals.
In the meantime, the DoE has approved extended permits in front of Cheniere Energy‘s (NYSE: LNG) Sabine Pass terminal in Louisiana and the Corpus Christi plant in Texas. The approvals will allow the terminals to export the equivalent of 0.72 billion cubic feet of LNG per day to any country with which the United States does not have a free trade agreement, including all of Europe. Cheniere says the facilities are already producing more gas than covered by previous export licenses.
By Alex Kimani for Oilprice.com
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