Pipeline developers' ability to build projects to link the Haynesville and Permian shale plays to the Gulf Coast will be critical to the support of an increasingly likely supercycle of new U.S. liquefied natural gas export facilities.
"Infrastructure development is the single biggest risk and exacerbated by what you see going on politically, where energy infrastructure has become so politicized that often common sense takes a backseat and what we need takes a backseat to what some special interest groups want," RBN Energy LLC's CEO David Braziel said.
This was the consensus among market participants at the LDC Gas Forums' Gulf Coast Energy Forum in New Orleans from Oct. 12 to 14, after they observed a rise in commercial activity tied to new U.S. LNG supplies in the wake of Russia's invasion of Ukraine that began Feb. 24.
"When infrastructure comes online, does that infrastructure come online such that the gas goes from the gathering to the interstate and all the way to the LNG terminal?" asked Matthew Piatek, director of gas, power and climate solutions at S&P Global Commodity Insights.
Gas demand
U.S. LNG feedgas demand before the Russian invasion had been on track to increase from about 11.9 Bcf/d in 2022 to 16.3 Bcf/d by 2025, then climb by another 3.5 Bcf/d by 2030, Piatek said. But the post-2025 increase in demand will likely be greater following the outbreak of war and European buyers' search for a supply alternative to Russian gas. Piatek said the period from 2026 to 2030 could see yet another 4.7 Bcf/d of additional feedgas demand beyond the initial outlook, reaching 24.5 Bcf/d in Commodity Insights' expected scenario and potentially over 30 Bcf/d.
Piatek described "a new foundation for the Gulf Coast" as a result of "the global gas reordering."
Feedgas demand for U.S. LNG export terminals has dropped in recent months from pre-summer highs but could climb in the coming weeks. Flows to major U.S. LNG terminals have averaged nearly 10.9 Bcf/d in October, down from a year-to-date average of 11.8 Bcf/d for 2022, according to S&P Global Commodity Insights pipeline flow data as of Oct. 14.
U.S. LNG exports have little room to grow until the Golden Pass LNG Terminal facility comes online more than a year from now. The developer of Golden Pass, backed by Exxon Mobil Corp. and QatarEnergy, expects the project to start up in 2024.
Permitting challenges
Golden Pass Chief Commercial Officer Jeff Hammad called for greater regulatory certainty for infrastructure developers. Golden Pass received approval from the Federal Energy Regulatory Commission in July to ramp up construction on the export project, but the proceeding — which spanned more than a year — had been cited by some industry executives as an example of the regulatory delays that are hindering the development of gas infrastructure.
"There are various arms of government that have conflicting views on where our country needs to go," Hammad said. "Over here, we are going to say 'Hey, LNG is appropriate.' And then you have got folks saying — 'We need to reconsider your permit, we need to look at it from a different angle. But at the same time, we want you to send LNG to our allies in Europe. But we don't like any more pipelines, and let's just keep that gas in the ground.'"
"If you react to every one of those things, you are going to lose focus," Hammad said.
The average natural gas project in the FERC permit process has experienced a nearly 14-month delay, according to Charlie Riedl, executive director of the Washington, D.C.-based Center for Liquefied Natural Gas trade group, in a presentation at the conference.
"FERC is functioning, but it is just not functioning efficiently," said Riedl, who predicted a slim chance of federal permitting reform getting passed in 2022.
Not much U.S. LNG export capacity will come online over the next year. This means a slew of pipeline projects in the permitting queue have time before they will be needed to supply new export facilities. But how the startup dates align for pipelines and LNG terminals will have significant implications for gas markets, industry representatives said.
Several speakers expressed doubt that Appalachian shale gas would play a lead role in supplying new export facilities because of challenges in building gas transportation infrastructure in the region. Instead, the Permian Basin and the Arkansas-Texas-Louisiana region are expected to be the biggest sources of feedgas supply growth. The Rockies and Anadarko production regions could also play a significant role, according to East Daley Analytics Vice President Rob Wilson, speaking on a forum panel.
"A lot of midstream players are realizing the importance of diversifying supply to meet LNG demand," Wilson said.
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