Viewpoint: US LNG first wave complete in 2020

  • Market: Natural gas
  • 02/01/20

The six projects comprising the first wave of US LNG exports are scheduled to be fully operational in 2020, culminating a massive $63bn buildout over the last several years that has revolutionized the global gas industry.

The prospects for an expected second wave of US LNG exports should become clearer later this year when a number of proposed projects are expected to make funding decisions for projects that would come on line in the early- to mid-2020s.

The ongoing US-China trade war will make it more difficult to fund second-wave projects if it is not resolved, as China is expected to be the fastest-growing LNG market in the foreseeable future. An interim agreement announced in last month did not include reductions to the 25pc tariff that China imposes on US LNG and propane, although Beijing said it would buy more US energy commodities "if needed" and based on "market principles."

Cheniere Energy first proposed exporting LNG from the contiguous US in June 2010 from its existing Sabine Pass LNG import terminal in Louisiana, as it faced potential bankruptcy because the US shale gas boom had virtually eliminated demand for LNG imports. The move was met with widespread skepticism, but this year the US became the world's third-largest exporter behind Qatar and Australia, surpassing Malaysia.

Combined feed gas to US LNG export plants averaged 7.68 Bcf/d (217mn m³/d) in December, about 8.1pc of the record US dry-gas production of 95 Bcf/d reached in October. US output is forecast to remain near those levels throughout the winter. Combined gas feed has averaged 8.31 Bcf/d so far in January.

Sabine Pass started exporting in February 2016 and is now the largest US gas consumer, processing an average of 3.89 Bcf/d in December and 4.04 Bcf/d so far this month.

All six US facilities are producing and exporting LNG, with Cameron LNG in Louisiana, Freeport LNG in Texas and Elba Island LNG in Georgia scheduled to bring their respective final first-wave liquefaction trains on line in 2020. When that process is complete, US baseload liquefaction capacity will be equivalent to 8.8 Bcf/d of gas and peak capacity will be equivalent to 10.4 Bcf/d.

Some second-wave projects have already been funded and are in construction, while others are expected to be funded in 2020. Cheniere is building two additional 5mn t/yr trains, one at Corpus Christi, Texas, scheduled to come on line in 2021, and the other at Sabine Pass, scheduled to start operating in the first half of 2023. In addition, in 2019 Venture Global funded its $7.1bn, 10mn t/yr Calcasieu Pass LNG project in Louisiana, scheduled to come on line in 2022.

The first wave of US projects significantly changed global contracting by selling supplies at Henry Hub-based prices with a flat liquefaction fee of about $3/mmBtu, rather than the traditional model of linking long-term LNG contracts to oil prices.

Cheniere hopes to in 2020 fund a seven-train, 11.45mn t/yr expansion at Corpus Christi that would be partly financed by US Permian basin producers.

Tellurian plans to finance its $15.2bn, 27.6mn t/yr Driftwood LNG project in Louisiana by selling customers equity at $500mn for offtake of 1mn t/yr, which Tellurian claims could lower free-on-board costs to $2.85/mmBtu with cheap Permian gas at $1/mmBtu.

NextDecade plans to fund this year its 27mn t/yr Rio Grande LNG project in Texas with a combination of contracting based on oil, Henry Hub and western European gas hub pricing.

Other projects that planned to make investment decisions in early 2020 include the 5mn t/yr Freeport LNG train 4 in Texas, the 6mn t/yr Annova LNG project in Texas, the 4mn t/yr Texas LNG facility, Venture Global's 20mn t/yr Plaquemines project in Louisiana, Sempra's 2.5mn t/yr Energia Costa Azul project in northwest Mexico that would use US gas, and Sempra's 13.5mn t/yr Port Arthur LNG project in Texas.

By Ron Nissimov


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Brent, FX drive Brazil natural gas price hike


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27/05/24

Brent, FX drive Brazil natural gas price hike

Sao Paulo, 27 May (Argus) — Average Brazilian natural gas network prices have continued to increase this year, maintaining their differential to the North Sea Dated crude benchmark, amid higher Brent crude prices and the Brazilian real's depreciation to the US dollar. Brazilian pipeline gas prices rose by 6.7pc to $12.15/mmBtu on 24 May from $11.39/mmBtu on 2 January — while crude rose by 5.9pc, according to Argus data. That increase was more than four percentage points higher the increase in Henry Hub Day-ahead gas index price, which rose by 1.6pc. The Brazilian real depreciated by 5.3pc to R5.1508 to the US dollar on 24 May from R4.8916/$1 on 2 January. Brent prices, the real-US dollar exchange rate and the Henry Hub index are the main indexations of natural gas contracts in Brazil. North Sea Dated and Brazilian natural gas prices spiked sharply starting in early April, with crude peaking on 13 April at $93.19/bl and Brazilian gas at $13.525/mmBtu, because of dueling missile strikes between Israel and Iran . Price increases were spearheaded by Transportadora Brasileira Gasoduto Bolivia (TBG), with that pipeline system reaching $12.833/mmBtu on 24 May, up by more than 12pc from January. Brent accounts for a larger percentage of the price for contracts on that grid than any other, at 16.75pc. The terms were signed in 2022, during the early months of the Russia-Ukraine war when global gas prices were rising. State-controlled Petrobras is a supplier in most of these contracts, but Portugal's Galp also owns a few deals. Average natural gas prices in the 4,500km (2,796-mile) pipeline owned by Transportadora Associada de Gas (TAG) — which operates in the north, northeast and southeast — were at $11.607/mmBtu on 22 May, a 2.9pc rise from January. Over 40 long-term contracts are connected to the TAG pipeline, reflecting the most diverse chunk of the Brazilian market . The 2,000km Nova Transportadora do Sudeste (NTS) pipeline — which links Rio de Janeiro, Minas Gerais and Sao Paulo states with Bolivia — has eight different contracts with indexation to Brent above 12.9pc, including all of Rio de Janeiro's contracts. The most recent expanded premium to the US gas benchmark price — which stood at $2.60/mmBtu on 23 May — indicates a rise in gas demand driven by cooling across south-Atlantic US states . Extreme weather was responsible early in the year for a hit on spot and futures prices, notably on 12 January, when Henry Hub Day-ahead price posted a sharp rise above $12/mmBtu. By Betina Moura Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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24/05/24
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24/05/24

Q&A: Oman Shell to balance upstream with renewables

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Gas also offers a very logical and nice link into blue and green hydrogen, whether in sequence or as a stepping stone to scale the hydrogen economy in the country. The last strategic pillar is to establish low-carbon value chains, predominantly centered around hydrogen, more likely blue hydrogen in the short term and very likely material green in the long term, which is subject to regulations and markets developing. How would you view Oman's potential to be a major exporter of green hydrogen? When examining the foundational aspects of green hydrogen manufacturing, such as the quality of solar and wind resources and their onshore complementarity, Oman emerges as a highly competitive country in terms of its capabilities. But where we are in technology and where we are in global markets and on policy frameworks — the demand centers for green hydrogen are maturing but not yet matured. 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India’s AMNS signs 10-year LNG supply deal with Shell


23/05/24
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23/05/24

India’s AMNS signs 10-year LNG supply deal with Shell

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Shell to step up gas exploration in Oman


23/05/24
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23/05/24

Shell to step up gas exploration in Oman

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