News
05/11/25
US LNG buildout to spur Permian-Haynesville competition
US midstream operators are striving to debottleneck key producing areas to
unlock additional supplies to LNG export plants, writes Tray Swanson London, 5
November (Argus) — The scale of the planned buildout in US liquefaction capacity
means new export projects in Texas and Louisiana will increasingly need to tap
supply from the Permian and Haynesville shale basins. But higher production from
both regions and more pipeline capacity out of the Permian will be required for
the two plays to satisfy the additional feedgas demand. The US has about 17.5bn
ft³/d (181bn m³/yr) of liquefaction capacity in operation and 15bn ft³/d under
construction, following a spree of final investment decisions this year. More
than half of this additional capacity is set to be commissioned by the end of
2028, which will require additional feedgas supplies of about 9.9bn-10.8bn
ft³/d, assuming liquefaction losses of 10-20pc. US gas production may need to
grow faster than currently forecast to meet this new demand. About 3.3bn-3.6bn
ft³/d of additional feedgas demand is expected to come from new facilities this
year, while total gas output in the US is expected to rise by 4.4bn ft³/d,
according to the US Energy Information Administration (EIA). But just 2.8bn
ft³/d of this year's new production will come from the Permian and Haynesville
basins — the best positioned for supplying new Gulf coast facilities.The
Marcellus and Utica basins in Appalachia — the biggest gas-producing region in
the US — are less able to meet new feedgas demand, given high utilisation on
pipelines connecting the basins with the Gulf coast and legal hurdles for
building any new interstate pipelines . The Gulf coast market could tighten
further next year, with about 2bn-2.2bn ft³/d of additional feedgas demand
scheduled to come on line but only about 700mn ft³/d of additional gas output
expected from the Permian and Haynesville basins. And even larger supply
deficits are projected for the following two years, if projects stick to their
scheduled timelines. But production in the Haynesville and Permian basins may be
able to grow faster than current forecasts suggest, if infrastructure
bottlenecks are removed. A growing network of pipelines is advancing in states
with industry-friendly regulatory and permitting regimes, which could be used by
Haynesville and Permian producers to ship their supply to the Gulf coast. The
Permian is set to remain the fastest-growing gas-producing play in the US, with
output expected to climb to 27.7bn ft³/d this year. Growth is forecast to slow
to 2pc in 2026, bringing total output to 28bn ft³/d, according to the EIA.
Bottlenecks have so far limited how much Permian gas can reach the
Texas-Louisiana border, where nearly 11bn ft³/d of liquefaction capacity is
being built. Negative energy The initial chokepoint is in the Permian itself,
where natural gas is a by-product of crude oil production and is tied to the
economics of crude rather than gas. This, coupled with limited pipeline
infrastructure, has often led to negative gas prices at west Texas' Waha hub,
leaving producers with little alternative other than to reinject gas into
reservoirs or increase linepack — gas stored in the pipeline network. Such
occasions have become more frequent since Texas regulators cracked down on
flaring allowances in 2021. Tight pipeline capacity meant Waha prices sank to a
record low of -$8.44/mn Btu in early October, when unplanned outages on
westbound flows coincided with planned maintenance on eastbound flows. Midstream
firms have plans to boost pipeline capacity out of the Permian. A total 9.1bn
ft³/d of eastbound capacity is set to enter service in 2026-28, most of which
will directly supply export facilities on the Gulf coast. Two projects will flow
southeast to the Agua Dulce hub, which has tie-ins to US developer Cheniere's
Corpus Christi terminal and fellow LNG exporter NextDecade's Rio Grande
facility. A third new line will link to the Katy hub, west of Houston. Midstream
firm Energy Transfer's 1.5bn ft³/d Hugh Brinson pipeline will ship Permian gas
to the Dallas area, hundreds of miles from the coast, but that could free up
more Haynesville supply to move south for export. There are further bottlenecks
at the Katy hub, especially after Texas-based WhiteWater's 2.5bn ft³/d
Matterhorn Express pipeline began shipping more Permian supply to Houston in
October 2024. Less than 3bn ft³/d of pipeline capacity runs from Katy directly
to the Gillis hub, north of Lake Charles, Louisiana — a key supply corridor for
LNG terminals. But midstream operators plan to add 7.5bn ft³/d of capacity to
the broader Texas-Louisiana LNG corridor by the end of the decade. The largest
of the three projects may be in operation by the end of this year, even though
flows are set to remain capped until LNG developer Venture Global's 4.4bn ft³/d
CP Express pipeline begins service in 2027. Crude economics last year resulted
in Permian gas flooding the regional market faster than new pipeline capacity
could enter service. In contrast, Haynesville producers had to rein in output
last year and into 2025 in response to oversupply in the US gas market that
brought Henry Hub prices below their breakeven. Haynesville production fell
sharply to 14.7bn ft³/d in 2024 from 16.4bn ft³/d a year earlier, as producers
curtailed operations in response to the low prices. Higher prices allowed output
to rebound to 15.1bn ft³/d in January-September and production is expected to
average 15.2bn ft³/d over 2025 as a whole and 15.6bn ft³/d in 2026, according to
the EIA. Breakeven costs in the Haynesville are about $3.50/mn Btu. Henry Hub
prices on the Nymex 2026 calendar strip were at $4.13/mn Btu on 3 November. Gas
output in the Haynesville could rise above the 2023 record after the completion
of pipeline projects that will ship Haynesville gas south to the Gillis hub on
the Louisiana coast. Two large projects started up in the second half of 2025.
Permian impurities But the additional infrastructure from both basins will
increase scope for competition between Haynesville and Permian producers and may
also create issues for LNG terminals because the gas in each basin has different
compositions. Permian supply tends to require more treatment to eliminate
impurities compared with Haynesville gas, specifically nitrogen and heavy
hydrocarbons. Nitrogen reduces gas' heating value and boiling point, meaning LNG
terminals have to use more energy in liquefaction. Most pipelines allow for gas
with nitrogen levels of about 3pc, but LNG facilities require nitrogen content
to be less than 1pc. Such shifts in feedgas composition increase the amount of
maintenance terminals require. Cheniere's 33mn t/yr Sabine Pass facility, on the
Louisiana side of the Sabine River, has reported issues with nitrogen since the
Matterhorn Express began tying in to interstate pipelines such as the Texas
Eastern Transmission and Transcontinental systems. Sabine Pass has had to change
its liquefaction process to accommodate higher nitrogen content and different
solvents are required to clean heavy hydrocarbons from the terminal's heat
exchangers, company executives say. The facility underwent planned three-week
maintenance in June, its first major outage since the Matterhorn began service
the previous year. Several planned LNG export plants will use nitrogen rejection
units (NRUs) to purify the feedgas on site, including Venture Global's 28mn t/yr
CP2 and compatriot energy firm Sempra's 27mn t/yr Port Arthur facilities. NRUs
can cost about $100mn-150mn/1bn ft³ of gas treated, market participants say. But
the process typically emits less methane than other methods of nitrogen removal
— a key distinction for US exporters seeking to further expand their share of
the European market, given the EU's plans to regulate methane emissions of
imported gas. Haynesville pipeline projects bn ft³/d Project Developer Capacity
Destination Date LEG Williams 1.8 Gillis 2025 NG3 Momentum 1.7 Gillis 2025 LEAP
phase 4* DT Midstream 0.2 Gillis 2026 Pelican WhiteWater 1.8 Gillis 2027 Total
5.5 *overall capacity at 2.1bn ft³/d — regulatory filings, company press
releases, EIA Katy pipeline projects bn ft³/d Project Developer Capacity
Destination Date Trident Kinder Morgan 1.5 Port Arthur 2027 Blackfin WhiteWater
3.5 Port Arthur 4Q25* Mustang Express ARM Energy 2.5 Port Arthur 2028-29 Total
7.5 *flows limited until Venture Global's CP Express begins in 2027 — regulatory
filings, company press releases, EIA Permian pipeline projects bn ft³/d Project
Developer Capacity Destination Date Blackcomb WhiteWater 2.5 Agua Dulce 2026
Hugh Brinson* Energy Transfer 1.5 Dallas area 2026 GCX Kinder Morgan 0.6 Agua
Dulce 2026 Apex† Targa 2.0 Port Arthur 2027-28 Eiger Express WhiteWater 2.5 Katy
2028 Total 9.1 *second phase could add 700mn ft³/d, †approved but not under
construction — regulatory filings, company press releases, EIA US output,
year-on-year change bn ft³/d Permian and Haynesville basins infrastructure Send
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