Gulf Coast LNG Poised to Dominate Global Market

Thu, March 01, 2018

Officials, executives and consultants at the S&P Global Platts annual LNG conference in Houston agreed that the production boom in West Texas and other shale basins throughout the country has already begun to transform the LNG market by increasing competition and trading. They said the U.S. will need to increase exports in the coming years as increasingly efficient drilling methods create a domestic supply glut of natural gas.

"We're going to have too much gas with nowhere to go," said Renato Pereira, vice president of business development and marketing for Houston's Tellurian Inc., an LNG venture

The interest in LNG exports, pioneered by Houston's Cheniere Energy in 2016, has intensified with the renaissance in U.S. energy production. In West Texas, energy companies have found cheap and effective ways to tap the rich Permian Basin, creating a steady supply of oil and gas for Gulf Coast refiners and exporters.

Steven Winberg, the U.S. Energy Department's assistant secretary for fossil fuels, said the nation has six projects underway in Texas, Louisiana, Georgia and Maryland that will support LNG exports in excess of 10 billion cubic feet per day. Already, the U.S. exports LNG to at least 20 foreign markets, the largest of which are in Asia.

Winberg said U.S. LNG exports are also ramping up in Europe, notably in Lithuania and Poland. Those countries have historically relied on natural gas from nearby Russia.

"U.S. LNG exports are expanding and reshaping the international gas markets," Winberg said.

Last fall, Winberg's office proposed a rule that would loosen regulations for small-scale LNG exporters shipping less than 140 million cubic feet per day, potentially expanding U.S. LNG shipments to smaller markets in the Caribbean, Central America and South America.

"This administration is committed to expanding the reach and the markets for American energy," Winberg said.

Cheniere's Sabine Pass facility in Louisiana, now the nation's only LNG terminal in operation, has already shipped more than 800 billion cubic feet, or roughly 225 cargoes, of natural gas since it began exports in 2016, according to the Energy Department. The company last week announced two long-term agreements to export LNG to China's state-owned oil company through 2043.

Other companies have invested millions of dollars in large-scale LNG processing and export terminals on both the Gulf Coast and the East Coast. Houston companies Freeport LNG and Kinder Morgan are expected to begin exports this year, the former out of its Quintana Island terminal and the latter out of its Elba Island project in Georgia.

The U.S. Energy Information Administration expects that the nation will become a net exporter of natural gas this year for the first time since 1957 as production outpaces domestic demand. By the end of next year, it anticipates U.S. companies will have the capacity to process 9.5 billion cubic feet of LNG per day, the equivalent of roughly three cargoes.

Tellurian, which is working to develop a Louisiana export terminal, is banking on an uptick in global gas demand as markets in Asia and elsewhere accelerate a shift from coal to cleaner-burning natural gas. Pereira said the company anticipates demand could jump to 408 billion cubic feet per day in 2025, up from 353 billion cubic feet per day last year.

"LNG has the potential to serve part of that demand," he said.