World’s Biggest LNG Exporter Has Pipeline Problem

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The energy crisis in Europe is believed to have propelled United States into becoming world’s largest liquefied natural gas (LNG) exporter.

Meanwhile, the US has the world’s largest backlog of near-shovel-ready liquefied natural gas projects.

Reports say, for the US, deliveries to energy-starved buyers in Europe and Asia have surged. This year alone, five developers have signed over 20 long-term deals to supply more than 30 million metric tons/year of or roughly 4 Bcf/d, to energy-starved buyers in Europe and Asia.

Recently, giant Cheniere Energy Inc. revealed that it’s had the most active year for contracting since 2011.

Meanwhile, volatile spot prices and a worsening supply outlook have triggered a rush by importers to negotiate long-term deals as they attempt to lock in prices.

According to a report by the Oil & Gas Journal, 10-year contracts are currently priced at 75% above 2021’s rates, with tight supplies expected to persist as Europe aims to boost LNG imports.

Whereas the United States has the world’s largest backlog of near-shovel-ready liquefied natural gas projects, takeaway constraints including limited pipeline capacity remain the biggest hurdle to expanding the sector.

In the Appalachian Basin, the country’s largest gas-producing region churning out more than 35 Bcf/d, environmental groups have repeatedly stopped or slowed down pipeline projects and limited further growth in the Northeast.

This leaves the Permian Basin and Haynesville Shale to shoulder much of the growth forecast for exports. Indeed, EQT Corp.(NYSE: EQT) CEO Toby Rice recently acknowledged that Appalachian pipeline capacity has “hit a wall.”

Analysts at East Daley Capital Inc. have projected that U.S. exports will grow to 26.3 Bcf/d by 2030 from their current level of nearly 13 Bcf/d.

For this to happen, the analysts say another 2-4 Bcf/d of takeaway capacity would need to come online between 2026 and 2030 in the Haynesville.

“This assumes significant gas growth from the Permian and other associated gas plays. Any view where oil prices take enough of a dip to slow that activity in the Permian and you’re going to have even more of a call for gas from gassier basins,” the analysts have said.

According to FERC, four U.S. projects are currently under construction, another 12 have been approved by federal regulators and four more have been proposed totaling 40 Bcf/d of potential LNG exports.

The pivotal Permian Basin is preparing to unleash a torrent of gas and gas projects to meet exploding and nat. gas demand.

Energy Transfer LP (NYSE: ET) is looking to build the next large pipeline to transport natural gas production from the Permian Basin.

The company is also working on the Louisiana-based Gulf Run pipeline, which will transport gas from the Haynesville Shale in Texas, Arkansas, and Louisiana to the Gulf Coast.

In an effort to increase exports to the European Union to stave off an energy crisis amid Russia’s war on Ukraine, the U.S. Department of Energy has authorized additional LNG exports from the planned Golden Pass LNG Terminal in Texas and the Magnolia LNG Terminal in Louisiana.

Jointly owned by Exxon Mobil (NYSE: XOM) and Qatar Petroleum, the $10B Golden Pass Terminal in Texas and the Magnolia LNG Terminal in Louisiana.

Jointly owned by Exxon Mobil (NYSE: XOM) and Qatar Petroleum, the $10B Golden Pass export project is expected to become operational in 2024, while Magnolia LNG, owned by Glenfarne Group, will come online by 2026.

The two terminals are expected to produce more than 3B cf/day of natural gas, although Magnolia is yet to sign contracts with customers.

Previously, American LNG developers were unwilling to construct self-financed liquefaction facilities that are not secured by long-term contracts from European countries.

However, the Ukraine war has exposed Europe’s soft underbelly and the harsh reality is forcing a rethink of their energy systems.

To wit, Germany, Finland, Latvia, and Estonia recently expressed the desire to move forward with new LNG import terminals.

Meanwhile, the DoE has approved expanded permits for Cheniere Energy’s (NYSE: LNG) Sabine Pass terminal in Louisiana and its Corpus Christi plant in Texas.

The approvals allow the terminals to export the equivalent of 0.72 billion cubic feet of LNG per day to any country with which the United States does not have a free trade agreement, including all of Europe.

Cheniere says the facilities already are making more gas than is covered by previous export permits.

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