The next round of LNG export projects have been making headlines, and based on recent announced E&P activity and relatively weak gas demand in 2017, the U.S. gas market may need these projects as a new source of demand by 2021. As of a year ago, BTU’s forward view only fully incorporated new pipeline capacity out of Appalachia, but now it also includes a new pipe out of Oklahoma, and 2 new pipelines out of the Permian. That is a lot of gas production growth to balance in the market unless natural gas demand materializes strongly. It also doesn’t help that Cameron LNG, which was originally supposed to begin commissioning in the back half of 2017, recently announced a delay to 2019. With domestic demand gains slowing across power burn, residential, commercial, and industrial, the North American gas market must find new levers to pull. It is likely that the biggest demand lever for the U.S. gas market over the next five years and beyond will be LNG exports.
As our paying clients have known for quite some time, BTU Analytics’ base view on the U.S. LNG export projects is that the 6 FERC approved projects that are actively moving forward (operating, under construction and close to construction) will create close to 10 Bcf/d of export capacity by 2019. However, even though we will create close to 10 Bcf/d of capacity, we do expect some seasonality and as a result average annual utilization of only close to 7 Bcf/d. Currently Sabine Pass is averaging about 2.0 Bcf/d, so this represents an incremental 5 Bcf/d of potential demand growth by the end of 2019.
FERC lists many of the “Approved” and “Proposed” LNG export projects on it’s website. While the list is long, some projects have stagnated. Recently, a ‘next round’ of LNG export projects have been making headlines and they are: Magnolia LNG (approved, not under construction) in Lake Charles, LA at 1 Bcf/d by 2021-2022, Tellurian’s Driftwood LNG (proposed to FERC with an EPC contract recently awarded to Bechtel) in Calcasieu Parish, LA at 4.0 Bcf/d starting service in 2022 and NextDecades’ Rio Grande LNG (proposed to FERC) in Brownsville, TX at 3.6 Bcf/d in 2022. This represents another 8.6 Bcf/d of LNG export capacity that can ramp higher starting in 2021. As long as U.S. E&Ps continue pushing production volumes higher, the U.S. gas market may need some of these new LNG export projects as a source of demand if US natural gas producers are going to see higher realized natural gas prices.
BTU Analytics will be following the next round of LNG export projects through the FERC process and will add them to our LNG export forecast once we have line of site on development. To follow BTU Analytics’ U.S. LNG export forecast, request a sample of the monthly subscription of the Henry Hub Outlook.