The US natural gas market will continue to be volatile for years to come as supply and demand growth far outpace the construction of new storage and transmission assets, executives at North American midstream companies and trading houses said today.
The US has moved from a roughly 60 Bcf/d (1.7bn m3/d) market eight years ago to a more than 100 Bcf/d market today — "and we haven't grown our storage capacity at all," said Rich Brockmeyer, head of North American natural gas and power at commodity trading house Gunvor at the CERAWeek by S&P Global energy conference in Houston, Texas. "I expect we'll have volatility for years to come," he said.
US production and consumption of gas is not likely to slow in the coming years, either, as a wave of LNG export terminals enter service on the US Gulf coast, gas-fired power generation continues to crowd out coal and the country's aging pipeline network requires ever more maintenance.
US LNG producer Cheniere moves between 7-7.5 Bcf/d of gas, Cheniere chief operating officer Corey Grindal said. When "something happens" to one of its liquefaction units, that pushes substantial volumes of gas back onto the market, he said. The US gas market learned first-hand how much LNG terminals can move domestic prices when a June 2022 fire shut down the 2.1 Bcf/d Freeport LNG terminal in Texas, putting a lid on gas prices over that period.
Building new storage capacity is not something that happens quickly, either. Finding a suitable geologic formation, locking down the requisite customer base and navigating the permitting process is a three- to four-year process before construction even begins, said Cynthia Hansen, president of gas transmission and midstream at the Canadian oil and gas pipeline giant Enbridge. And "all" US gas pipelines are "pretty much full" these days, she said.
Enbridge knows well the challenges to building new interstate gas lines in the US, having had a 20pc stake in the $1.1bn PennEast pipeline that was canceled in September 2021 after being unable to secure needed permits from New Jersey.
But Grindal was sanguine on the prospect for the development of new infrastructure. With so much new gas demand coming on line — from new US LNG export terminals to cheap US gas driving increased manufacturing activity in the US — at some point the market will send signals that overcome developers' skittishness around investment in the space, he said.
