The United States is the world’s largest exporter of liquefied natural gas, but the lack of gas pipelines is hampering the expansion of the industry. Antonino Neri’s article
The United States has become the world’s largest exporter of LNG thanks to deliveries to buyers in Europe and Asia that have increased because all countries are energy hungry. So far in 2022, five developers have signed more than 20 long-term agreements to supply more than 30 million tons/year of LNG or about 4 billion cubic feet/day to buyers in Europe and Asia.
LNG contract prices
LNG giant Chener Energy recently revealed that it has had its busiest trading year since 2011. Meanwhile, volatility in spot prices and deteriorating supply expectations have sent importers rushing to trade long-term deals, while trying to freeze prices. According to a report by the Oil & Gas Journal, 10-year LNG contracts are currently priced around 75% above 2021 rates, with limited supplies expected to continue. Europe wants to increase LNG imports.
Unfortunately, while the United States has the world’s largest backlog of LNG projects about to take off, extraction constraints, including limited pipeline capacity, remain the biggest obstacle to industry expansion.
In the Appalachian Basin, the nation’s largest gas-producing region, which produces more than 35 billion cubic feet per day, environmental groups have repeatedly halted or slowed pipeline projects and limited further growth in the Northeast. That leaves the Permian Basin and Heinsville shale to take over much of the growth forecast for LNG exports. In fact, EQT Corp. CEO Toby Rice recently acknowledged that the capacity of the Appalachian pipeline has “hit a wall.”
East Daly Capital analysts expect US LNG exports to grow to 26.3 billion cubic feet per day by 2030, from the current level of 13 billion cubic feet per day. For this to happen, analysts say an additional 2-4 billion cubic feet per day of takeout capacity must be available between 2026 and 2030 in Heinsville.
“This assumes significant gas growth from the Permian Basin and other associated gas fields. Analysts said that any scenario in which oil prices fall enough to slow this activity in the Permian will lead to increased demand for gas from the most gaseous basins.
According to FERC, there are four LNG projects in the United States currently under construction, 12 more have been approved by federal regulators, and four more have been proposed, totaling 40 billion cubic feet/day of potential LNG exports.
The pivotal Permian Basin is preparing to launch a wide range of gas projects to meet the boom in demand for LNG and natural gas. Energy Transfer is looking to build the next major pipeline to transport natural gas production from the Permian Basin. The company is also working on the Gulf Run pipeline in Louisiana, which will carry gas from Haynesville Shale in Texas, Arkansas and Louisiana to the Gulf Coast.
MATTERHORN FAST PIPELINE
In May, a consortium of oil and natural gas companies — WhiteWater Midstream, EnLink Midstream, Devon Energy and MPLX LP — announced that it had reached a Final Investment Decision (FID) to proceed with construction of the Matterhorn Express pipeline, after completion. Ensure adequate fixed transportation arrangements with freight forwarders.
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 Al Waha (Texas) to Katy, near Houston Supply to the Matterhorn Express pipeline will come from multiple connections in the upper Permian Basin, including direct connections to the Midland Basin processing plants via a roughly 75-mile side, as well as a direct link to the 3.2 Agua Blanca pipeline.Bcf/d, A joint venture between WhiteWater and MPLX”. The Matterhorn pipeline is expected to enter service in the second half of 2024, pending regulatory approvals.
Importance of the Permian Basin
WhiteWater CEO Christer Rundlof described the company’s partnership with the three pipeline companies to develop “additional gas transportation from the Permian Basin, while production continues to grow in West Texas.” Randloff says Matterhorn will provide “premium market access with superior flexibility to Permian Basin shippers, and play an important role in reducing burn volumes.”
Matterhorn joins a growing list of pipeline projects designed to capture increasing amounts of Permian supplies to send to downstream markets. WhiteWater has revealed plans to expand Whistler Pipeline’s capacity by approximately 0.5 Bcf/d, to 2.5 Bcf/d, with three new pressure stations.
MPLX has several other expansion projects under construction: The company says it plans to complete construction of two processing plants this year, and recently made the final investment decision to expand the Whistler pipeline. Also in May, Kinder Morgan subsidiary Kinder Morgan launched an open season to assess shippers’ interest in expanding the Gulf Coast Express 2.0 Bcf/d pipeline.
Meanwhile, KMI has already completed a binding opening season for the Permian Highway Pipeline (PHP), with a base shipping agent for half of the planned expansion capacity of 650 million cubic feet/day.
Exporting LNG to Europe
In an effort to increase LNG exports to the European Union, to avoid an energy crisis amid the Russian war against Ukraine, the US Department of Energy has allowed additional LNG exports from the planned Golden Pass terminal, in Texas, and the Magnolia LNG terminal, Louisiana. The $10 billion Golden Pass LNG export project, jointly owned by ExxonMobil and Qatar Petroleum, is expected to become operational in 2024, while Glenfarne Group-owned Magnolia LNG is expected to become operational by 2026. It is expected that The two plants produce more than 3 billion cubic feet per day of natural gas, although Magnolia has not yet signed contracts with customers.
Previously, US LNG developers were unwilling to build self-financing liquefaction plants that were not backed by long-term contracts with European countries. However, the war in Ukraine has exposed Europe’s weak vulnerability and harsh reality is forcing them to rethink their energy systems. In fact, Germany, Finland, Latvia and Estonia have recently expressed their desire to go ahead with new LNG import terminals.
Meanwhile, the US Department of Energy has approved an expansion of permits for Cheniere Energy’s Sabine Pass terminal in Louisiana and its Corpus Christi facility 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 all of Europe. Chener says the facilities are already producing more gas than covered by previous export permits.
(The article was published on energy behind)
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