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U.S. LNG Exports Part 1: Capacity Jumping In 2019, But Will There Be Enough?

Jul. 11, 2018 8:00 AM ETGASL, FCG, GASX, CQP, CQH, D, KMI, SHEL, SRE, ET, XOM, TELL7 Comments
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VettaFi Research

By Stacey Morris

Last year, the US was one of 19 countries exporting liquefied natural gas (LNG) and played a relatively small role in the global market. To be precise, LNG exports from the US represented just 5% (1.9 Bcf/d) of the 38.2 Bcf/d global LNG market. That said, the US is on the brink of adding significant LNG export capacity next year and becoming a sizable player in the global LNG market. As an indication of the rising significance of the US, the World Gas Conference was held in Washington, D.C., last month. This was the first time in thirty years that the conference - which takes place every three years - was hosted in the US.

Today, we look at the LNG capacity additions slated for 2019. We also discuss the global backdrop for US LNG exports, including concerns for a potential supply gap in the mid-2020s and what US projects are currently on the drawing board to potentially help fill that gap. We also look at the potential implications for LNG exports in light of the ongoing trade dispute with China. Next week, in part 2, we'll look at the broader benefits of LNG exports for the energy space, particularly midstream.

US LNG export capacity to dramatically increase next year.

Today, operating US LNG export capacity is limited to Cheniere's (LNG, CQP, CQH) Sabine Pass terminal in Louisiana and Dominion Energy's (D) Cove Point terminal in Maryland, which shipped its first cargo earlier this year. By the end of next year, though, LNG export capacity is expected to jump to 10 Bcf/d as shown below. All this capacity will be added in Texas and Louisiana, except for Kinder Morgan's (KMI) Elba Island facility on the coast of

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Comments (7)

Thank you for an excellent article.
Looking forward to Part 2.
Long: CQP, GLMP, D, BP, XOM.
James Hanshaw profile picture
Good article. I have my doubts that China will target LNG imports from the US in retaliation to Trump’s trade war. The Chinese like cheap prices and all the time US LNG prices stay low I expect they will keep buying.

I had my own views on natgas published here seekingalpha.com/...
12 Jul. 2018
Because Cove Point started shipping March this year, how it is possible it cannot produce any more full year 2019?
At least capacity pic has identical slice both years.
GridScaleBatteryInvestor profile picture
"The chart on the right shows the dearth in final investment decisions1 (FID) for adding liquefaction capacity globally in 2016-17. For its part, the US did not have any FIDs in these years"

Poor Kinder Morgan.

In 2016 they FID'ed a 2 mtpa facilty (Elba Island), but no one gives them any credit for doing so. :(

Giving they went from FID to first LNG in ~24 months instead of Cheniere's 42 months for Corpus Christi Train 3, what are the pros and cons of Elba Island's approach vs Kinder Morgans?
Exports will affect the price because they will be drawing so much and we are limited on pipe lines only what I think I may be wrong
FrankEllis profile picture
1-How will the exports affect the price of natural gas used in USA homes and businesses?

2-How will the need for financing affect MLP distributions and yields?
GridScaleBatteryInvestor profile picture
In the US fracking is now supplying about half the supply. The pipeline network is rapidly getting built out such that it isn't a limiting factor.

We are at the cusp where with 6 to 12 months notice the frackers can ramp-up supply to meet demand.

Cheniere is a great example. They are the biggest buyer of physical gas in the US. They don't do a lot of spot market purchasing. Instead, they have signed multi-year deals with gas suppliers. The upstream gas producers that are selling to them have a consistent and reliable customer. Effectively they can drill and produce on a reliable / well-known schedule.

By doing that, Cheniere's baseline demand for gas is almost ignorable. The only effect they have is maintenance when demand falls and above expected demand when they are pushing the trains as hard as they can to leverage LNG spot market sales.

Also, remember Cheniere's demand is relatively consistent year round which is also a benefit to the overall natural gas economy.
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