I spoke at a natural gas conference this week in Houston and had an end user approach me and ask why is Henry Hub pricing with relative strength at over $3/MMBTU during the spring shoulder season when utility and power demand typically see seasonal declines. While there is a whole supply story of how natural gas production is still playing catch up to demand and pipeline capacity, part of my response to the end user was, look at how much year-over-year new incremental demand LNG represents in and around Henry Hub. In this commentary, we will take a look at how LNG has juiced natural gas demand.
As shown below, the meters at Sabine Pass are running at around 2.2 Bcf/d this week representing a year-over-year increase of 1.6 Bcf/d. These levels are all being achieved with currently Trains 1 through 4 liquefying gas (at various stages of commercialization). Cheniere stated in their Q1 2017 earnings call last week that in 2017 “Cheniere became the largest consumer of natural gas in the United States” and they have now loaded over 100 cargos. To put this in perspective, Sabine has represented 255 Bcf of gas demand in 2017 alone. At an average of 2.2 Bcf/d this week, Sabine Pass is consuming as much as the entire state of Pennsylvania (PA ranks as the 6th largest gas consuming state according to the EIA for May 2016).
So if we look at how LNG export meters rank against all other demand meters individually, we see the impact and scale of LNG. While LNG still represents a small piece of total US gas demand, the individual meters stand out in a league of their own against the biggest industrial, utility (LDC) and power meters – see table below. Using a interstate pipeline flow snap shot from yesterday where all demand meters are ranked by largest volume, the three meters at Sabine Pass place in first, third and fourth (joined by a Duke power plant in North Carolina and a Nicor LDC meter in Illinois)
LNG demand will continue to ramp up through the remainder of 2017 with Cove Point, Elba Island and Cameron coming online later this year. With further news this morning of natural gas being worked into a trade deal with China, all of these events will drive U.S. LNG export demand higher through the remainder of 2017. For more analysis on LNG export projects, timing, volumes and market impacts, request a sample of BTU Analytics’ Henry Hub Outlook.