Maintenance Curbs Feed Gas Demand for LNG, U.S. Says

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

The U.S. expects demand for feedstock for LNG exports to dwindle. Piped exports to Mexico, however, are on the rise.

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LNG Sector Facing some Pressure

The demand for feed gas to support exports of liquefied natural gas (LNG) from the U.S. is lower because of market issues and maintenance along the Gulf Coast, the U.S. federal government reported.

The U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, said in a monthly market report for August that it expects LNG exports to be about 1.1% below its forecast of 16.7 billion cubic feet per day (Bcf/d) of gas in the liquid form for last month.

War in the Middle East that began in late February with joint U.S.-Israeli airstrikes is taking a toll on the global energy sector. Last month saw signs of a breakthrough by way of a memorandum of understanding between Iran and the U.S. government, though fighting since has intensified.

"In July, international prices rose to levels last reached in early April, as LNG vessel traffic through the Strait of Hormuz slowed considerably after strikes on vessels resumed on July 7," the report read.

Attacks on infrastructure in Qatar, among the world leaders in LNG exports, could sideline some of its exports for as long as five years. At home, the EIA said ongoing maintenance at the Freeport LNG facility is expected to have a short-term impact on exports.

Industrial Info Resources offers more information on Freeport LNG in its Global Market Intelligence (GMI) Oil & Gas Plant and Project databases, where readers can find details--including construction schedules, investment values and necessary equipment--in a plant profile.

According to Industrial Info Resources data, Freeport received 1.2 billion cubic feet of feed gas on Wednesday. It's designed to handle as much as 2.37 Bcf/d.

"However, even with Freeport fully operational, exports would remain limited due to slow growth in additional export capacity, despite U.S. price spreads to Europe and Asia remaining elevated due to ongoing disruptions," the EIA's report read.

The Texas facility has experienced regular issues since operations began in 2019. Feed gas is running about 50% this week. Last year, it moved as low as 400 million cubic feet after the Gulf South Pipeline, one of nine arteries feeding the Freeport terminal, said deliveries were suppressed after the operator failed to take confirmed quantities at a delivery meter.

By the Numbers

• 8 Bcf/d in piped natural gas to Mexico
• 50% feed stock capacity for the Freeport LNG terminal

Piped Gas Feeding Mexican LNG Exports

Elsewhere, piped natural gas exports from the U.S. are expected to increase from 9.6 Bcf/d to 10 Bcf/d by next year, because of the demand pull from the Energia Coastal Azul LNG terminal.

Construction at the facility on Baja California's Pacific Coast in Mexico started in 2021. Industrial Info Resources has been tracking the project since its inception more than 10 years ago, and data show the plant will produce 3.25 million tons per annum (MTPA) at full capacity from a single liquefaction unit, or train.

Readers can learn more about the Baja California terminal from a detailed project report.

It delivered its inaugural cargo to an unspecified Asian consumer last month while still in the commissioning phase. According to Industrial Info Resources data, piped exports to Mexico averaged just shy of 8 Bcf/d over the five-day period to Wednesday.

Total exports of gas in the liquid form drawn from U.S. shale deposits are expected to average 17.4 Bcf/d this year, jumping to 18.6 Bcf/d by next year.

Total marketed natural gas production is expected to average 122.5 Bcf/d this year and 127.8 Bcf/d for 2027. In terms of percent, the Haynesville play, situated largely on the border of Texas and Louisiana, gains the most, with 8% annual growth expected.

Key Takeaways

• The U.S. LNG sector may be facing some headwinds, federal data suggest
• Ongoing maintenance is limiting the sector's demand for feed stock

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