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- New LNG export plants will bring relief to US producers, but they’ll take time.
Kevin Crowley, Bloomberg News
HOUSTON
EnergiesNet.com 03 30 2023
For US natural gas producers, the LNG export bonanza can’t come quickly enough.
Mild weather and long-term pipeline constraints are limiting consumption at home while production is marching toward January’s record levels, leaving the country awash with gas.
From the heady days of last summer, when fears over global shortages peaked, prices at Henry Hub — the Louisiana pipeline that serves as a national benchmark — have tumbled almost 80%. This week they dipped below $2 per million British thermal units, a level akin to 2020 prices.
Relief is coming for US producers, but it will take time. While liquefied natural gas plants designed to freeze and ship the fuel are springing up along the Gulf Coast, it will be at least a year until the next major export facility becomes operational.
Two projects, led by Sempra Energy and Venture Global LNG Inc., overcame the banking crisis to get their final go-ahead this month, a combined investment of almost $21 billion. Construction will take two to four years.
In the meantime, domestic gas producers are riding out the cycle with a well-worn strategy of dropping rigs, hedging and tapping debt.
How long this current downturn may last is far from clear. US production is up 25% in the past five years, driven by shale oil basins, where gas is a by-product of more valuable crude.
Then there’s the impact of producers’ newly discovered zeal for curbing gas flaring. That’s good for the climate but it’s boosting supply, as well. Permian oil production is up 15% since the onset of Covid, while gas is 30% higher.
And there’s another, more fundamental change looming on the horizon. As shale oil wells mature, they become more gassy. One energy executive said this is already happening in North Dakota, where gas output is near record levels, even though crude production is down 25% since 2019.
The state’s Bakken region “is seeing itself reach a bubble point, and natural gas is increasing in new completions with less crude oil,” the executive said in the Federal Reserve Bank of Dallas energy survey.
Analysts believe another giant LNG export project — NextDecade Corp.’s Rio Grande — could get the green light within weeks. Based on current trends, it will be much needed.
Customers across the Atlantic have been lapping up US LNG as they race to replace Russian piped-gas supplies amid the war in Ukraine.
But America’s LNG export boom is as much about saving the US gas industry from yet another domestic glut as it is about releasing Europe from Russia’s energy stranglehold.
–Kevin Crowley, Senior Reporter
bloomberg.com 03 30 2023
