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Is LNG Storage Enough to Prevent Volatility in Loadings?

With the first storm of the season, Hurricane Barry, now out of the Gulf and its remnants tracking across the Midwest, it’s time to assess how Hurricane Barry impacted pipeline deliveries to LNG facilities along the Gulf Coast and just how long LNG facilities can continue to take feed gas in the face of storms impacting operations. Today’s Energy Market Commentary will highlight the availability of LNG storage at each facility along the Gulf Coast relative to current and expected production of LNG.

Sabine Pass and Cameron Pass LNG were the 2 facilities most directly in line with Hurricane Barry which made landfall on July 13. However, both facilities were still to the west of the most impacted areas.  Yet, even with the storm tracking to the east, Sabine Pass started taking less feed gas into the facility on July 11.  Deliveries into Sabine Pass dropped from 3.74 Bcf/d over the previous 7 days to 2.9 Bcf/d on July 11 and July 12 before rebounding.  Additionally, Cameron Pass, currently in commission of train 1, also saw deliveries drop for a day before bouncing back. The chart below shows pipeline deliveries into the two facilities since June 1, 2019.

LNG Storage - Feedgas deliveries to Sabine and Cameron

While the overall drops in volumes are small, they represented 15% of the deliveries to Sabine Pass and nearly 50% of the volumes into Cameron.  As LNG exports continue to ramp up at Cameron, Freeport, and other facilities along the Gulf Coast, the question shifts to how much storage capacity do the facilities have to absorb disruptions in loadings. Cheniere’s Sabine Pass currently has 5 storage tanks with approximately 17 Bcfe of storage capacity. However, two of those tanks are currently out of commission and have been since Feb. 8, 2018 after being ordered to shut down due to cracks. The reduction in storage capacity leaves Sabine Pass with only about 10.2 Bcfe of operational storage capacity.

As highlighted above, Sabine has been taking nearly 3.74 Bcf/d of gas into the terminal prior to the storm. If 10% of the volume is used for fuel for the facility, then approximately 3.45 Bcfe/d of LNG is being created. With only the 3 operational storage tanks, Sabine Pass can only generate LNG for approximately 76 hours or a little over 3 days without loading a vessel before filling its storage tanks. Even with 5 operational storage tanks, Sabine can only run for a little over 5 days before filling the storage tanks at current LNG production volumes.

The table below shows the planned peak export capacity for each of the Wave 1 LNG facilities, the total LNG storage capacity at each facility, and the number of days the facility can run before needing to load a vessel or being required to halt taking feedgas.

The smaller Cove Point and Elba Island facilities could continue operations for over three weeks in between loading vessels. Both facilities were originally designed to provide peak shaving services in the winter time via imports and have significantly more storage relative to their export capacity as a result. All four projects in the Gulf though are very similar with 13.9 Bcfe to 17.4 Bcfe of storage capacity. As a result, the facilities could maintain operations for between 4-6 days at full utilization following the completion of Wave 1 construction activities before exhausting storage capacity.

While Hurricane Barry tracked far to the east of Sabine and Cameron LNG, the impacts are already evident that storm activity in the Gulf could have significant impact on feed gas demand at the facilities going forward. As an example, Sabine, Cameron and Freeport are separated by less than 100 miles and will combine for over 10 Bcf/d of demand when finished. As Wave 2 facilities gain steam, the concentration of facilities in a small corridor could add significantly volatility to demand in the years ahead.  For more on BTU Analytics’, outlook on demand from LNG exports and impacts see our Henry Hub Outlook.

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Anthony (Tony) Scott has built an in depth understanding of the North American energy market by providing investment advisory services and leading teams of analysts focused on the North American energy complex. Mr. Scott has conducted hundreds of consulting engagements assisting producers, marketers, midstream, refiners and private equity understand how rapidly changing natural gas, natural gas liquids, and crude oil markets in North America would impact their assets.

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