The world’s largest LNG exporter has a pipeline problem | OilPrice.com

The United States has become the world’s largest exporter of liquefied natural gas (LNG) as deliveries to energy-starved buyers in Europe and Asia have increased. During the current year, five developers have signed more than 20 long-term contracts to supply more than 30 million metric tons/year of LNG, or approximately 4 billion cubic feet/d, to buyers in need of energy in Europe and Asia.

Recently, the LNG giant Cheniere Energy Inc.(NYSE: LNG) revealed that it has the most active year to contract since 2011. Meanwhile, spot price volatility and deteriorating supply prospects have sparked a rush by importers to negotiate long-term deals as they attempt to lock in prices. According to a report from Oil and Gas Journal10-year LNG contracts are currently priced around 75% above 2021 tariffs, with tight supplies expected to persist as Europe aims to boost LNG imports.

Unfortunately, while the United States has the world’s largest backlog of near-shovel-ready liquefied natural gas projects, take-home constraints, including limited pipeline capacity, remain the biggest obstacle to expanding the sector. .

In the Appalachian Basin, the nation’s largest gas-producing region producing more than 35 billion cubic feet a day, environmental groups have repeatedly halted or slowed pipeline projects and limited growth in the northeast. This leaves the Permian Basin and the Haynesville Shale to support much of the projected LNG export growth. In effect, EQT Corp.(NYSE: EQT) CEO Toby Rice recently acknowledged that Appalachian pipeline capacity had “hit a wall.”

Analysts at East Daley Capital Inc. have forecast U.S. LNG exports to reach 26.3 billion cubic feet per day by 2030 from their current level of nearly 13 billion cubic feet per day. For that to happen, analysts say an additional 2-4 bcfd of takeout capacity would need to come online between 2026 and 2030 in Haynesville.

This assumes significant growth of Permian gas and other associated gas plays. Any sight where oil prices drop enough to slow down this activity in the Permian and you will need even more gas from more gaseous basins“, said the analysts.

US pipeline companies to watch

According to FERC, four LNG projects in the United States are currently under construction, 12 more have been approved by federal regulators and four more have been proposed, totaling 40 Bcf/d of potential LNG exports.

The Pivotal Permian Basin is preparing to unleash a torrent of gas and gas projects to respond to the explosion of LNG and nat. gas demand. LP Energy Transfer (NYSE: ET) seeks to build the next great 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 Haynesville Shale in Texas, Arkansas and Louisiana to the Gulf Coast.

Energy Transfer is expected to report its second quarter results 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 of the ‘last year.

Last May, a consortium of oil and gas companies, namely WhiteWater Midstream LLC, Intermediate EnLink (NYSE: ENLC), Devon Energy Corp. (NYSE: DVN) and MPLX-LP (NYSE: MPlX) announced that they have made a final investment decision (FID) to proceed with the construction of the Matterhorn Express Gas Pipeline after securing sufficient firm transportation agreements with shippers.

According to the press release, ”The Matterhorn Express pipeline was 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 of Houston, TX. Supply from the Matterhorn Express pipeline will come from several upstream connections in the Permian Basin, including direct connections to processing facilities in the Midland Basin via an approximately 75-mile lateral, as well as a direct connection to the Agua Blanca of 3.2 billion cubic feet / d. Pipeline, a joint venture between WhiteWater and MPLX.”

Matterhorn is expected to be commissioned in the second half of 2024, pending regulatory approvals.

WhiteWater CEO Christer Rundlof touted the company’s partnership with the three pipeline companies in the development “transporting more gas out of the Permian Basin as production continues to grow in West Texas.” Rundlof says Matterhorn will provide “premium market access with superior flexibility for Permian Basin shippers while playing a critical role in minimizing flared volumes.”

Matterhorn joins a growing list of pipeline projects designed to capture growing volumes of Permian supply to send to downstream markets.

WhiteWater has revealed plans to expand the Whistler pipelinefrom approximately 0.5 Bcf/d, 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) kicked off opening season to gauge shippers’ interest in expansion 2.0 Bcf/d Gulf Coast Express Pipeline (GCX).

In the meantime, KMI has already completed a binding open season for the Permian Highway Pipeline (PHP), with a base shipper already in place for half of the planned expansion capacity of 650 MMcf/d.

In an effort to increase LNG exports to the European Union to avert an energy crisis as part of Russia’s war on Ukraine, the US Department of Energy has additional authorized LNG exports the future Golden Pass LNG terminal in Texas and the Magnolia LNG terminal in Louisiana.

Co-ownership of Exxon Mobil (NYSE:XOM) and Qatar Oilthe $10 billion Golden Pass LNG export project is expected to become operational in 2024, while Magnolia LNG, owned by the Glenfarne Group, will be commissioned by 2026. The two terminals are expected to produce more than 3 billion feet cubes per day of natural gas, although Magnolia has not yet signed contracts with its customers.

Previously, US LNG developers were unwilling to build self-funded liquefaction facilities that are not secured by long-term contracts with European countries. However, the war in Ukraine has revealed the soft underbelly of Europe and the harsh reality forces them to rethink their energy systems. Namely, Germany, Finland, Latvia and Estonia have recently expressed interest in moving forward with new LNG import terminals.

Meanwhile, DoE approved expanded permits for Energy Cheniereof (NYSE: LNG) the Sabine Pass terminal in Louisiana and its Corpus Christi plant in Texas. The approvals 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 any Europe. Cheniere says the facilities are already producing more gas than covered by previous export permits.

By Alex Kimani for Oilprice.com

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