Commodities 2024: Coming US LNG supply wave to inch closer as new projects near startup

US LNG export capacity will grow in 2024 after a year marked by a lack of major additions, presenting a new source of demand growth for the domestic market and additional supply for global gas buyers facing prices that remain high compared with historical norms.

But the potential for growth and the timing remains critical questions, according to market observers, with a handful of North American exporters that could start ramping up feedgas deliveries to their facilities in the new year as they get closer to bringing them online.

Most of the North American capacity additions are not expected to materialize until the final months of 2024 before a wave of new supply arrives in 2025. Around 8.4 million mt/year of new capacity could be added by the end of 2024 on top of the 84 million mt/year of liquefaction capacity in operation currently, according to S&P Global Commodity Insights analysts.

By early 2025, additions could rise to around 18 million mt/year beyond current levels, with the expansion expected to reach more than 53 million mt/year over the course of that year.

"The ramp up of North American supply at the end of 2024 and through 2025 will allow for Europe to further reduce its reliance on Russian gas, while at the same time supporting demand growth across Asia," Ross Wyeno, director for LNG analytics at S&P Global, said. "We expect that demand will grow to meet this new supply, primarily in Asia."

In the US, projects expected to start commissioning work in 2024 include Venture Global's Plaquemines LNG terminal in Louisiana, Cheniere's midscale expansion of its Corpus Christi LNG plant in Texas, and the QatarEnergies and ExxonMobil-sponsored Golden Pass LNG export facility in Texas.

In Mexico, New Fortress' first 1.4 million mt/year floating export terminal is expected to start commercial operations offshore Altamira, Tamaulipas state, Mexico. New Fortress began startup work in late 2023 as the developer prepared to export its first commissioning cargo from the project, which will be supplied with US gas, albeit a relatively small volume of about 200 MMcf/d.

Increasing feedgas demand is expected to be the only meaningful source of demand growth for the US gas market in 2024, said Nikolay Filchev, director for global gas at S&P Global.

"Basically, we are not going to see a material increase in feedgas until the second half of the year, if at all," Filchev said. "If anything, it makes the market looser for longer."

Golden Pass

ExxonMobil said on Dec. 6 it expected Golden Pass to start producing LNG in the first half of 2025, a delay from the previous timeline for bringing the facility online in 2024. The company, which did not specify a reason for the revision, said it expected mechanical completion of the first train at the end of 2024.

While only a slight delay, the later production start for Golden Pass added to an increasingly bearish outlook among US natural gas futures traders for 2024 because it suggested US LNG feedgas demand could rise at a slower rate that market participants had expected. It was seen cutting into the premium of 2024-2025 Henry Hub gas contracts in the futures and forwards markets.

Headed into the holiday weekend Dec. 20, when the contract settled at $3.43/MMBtu, Henry Hub December 2024 forwards were down about 11% since Dec. 5, a day before ExxonMobil updated its Golden Pass timeline. January 2025 forwards were down by a similar percentage, falling to $3.692/MMBtu from $4.146/MMBtu.

Potential early startups

There were more bullish signals elsewhere. Cheniere in early November said a 10 million mt/year midscale expansion of its Corpus Christi LNG export terminal in Texas could begin producing LNG by the end of 2024 as the project continued to track ahead of schedule. Executives did not specify how much volume could be produced next year but said they were optimistic the facility would be able to provide additional LNG supply to a global market they expected would remain delicately balanced.

In Canada, the first phase of the Shell-led 14 million mt/year in Kitimat, British Columbia, could startup in 2024, according to comments from project participants in recent months. In late October, TC Energy announced the completion of the massive Coastal GasLink pipeline that will supply the export terminal. Shell maintained its timeline of "start-up by the middle of this decade" in early November.

A ramp up in deliveries to the project from the Montney Shale in Canada could mean less gas is available for imports by the US, helping to tighten market fundamentals and supporting higher US gas prices.

Analysts at Goldman Sachs said in a recent note to clients that they expect new US export facilities to tighten local balances from late 2024 until local production responds higher. One effect of the increase abroad will be "helping rebuild Europe's security of energy supply," Goldman Sachs analysts said.

"We see 2025 as the first year of the next bear cycle for global LNG," the bank analysts said.