Released July 21, 2021 | SUGAR LAND
en
Researched by Industrial Info Resources (Sugar Land, Texas)--The U.S. North American natural gas midstream sector is emerging from survival mode in the wake of the COVID-19 pandemic, but still faces some headwinds. Industrial Info kicked off its North American Market Outlook Mid-Year Review with a view of the macro spending outlook, followed by a deeper dive into the Oil & Gas sector. Among the presenters was Shane Mullins, Industrial Info's vice president of product development, who discussed the midstream natural gas sector, including natural gas liquids (NGLs) and liquefied natural gas (LNG).
Among the headwinds are regulatory uncertainties from the Biden administration and a new emphasis from investors on environmental, social and governance (ESG) policies. As the activity in the midstream sector slowed drastically last year as natural gas demand declined, this year, midstream operators are on focused on renegotiating contracts and are plowing capital into increased returns rather than expansion.
U.S. natural gas production is expected to rise to 94 billion cubic feet (Bcf) next year and reach 100 Bcf by 2024.
Oil and gas production rigs in the U.S. remain 40% lower than pre-COVID levels, although there has been an emphasis on more natural gas takeaway capacity and less flaring. This can definitely be seen in the Permian Basin. The Whistler Pipeline, which is set to go into service this year, will further improve natural gas takeaway capacity in the U.S.' most prolific basin. The Haynesville already boasts some of the lowest-carbon natural gas in the world, but additional infrastructure is needed in the Bakken Shale to further minimize flaring. Mullins said there's about $1.8 billion in gas-gathering infrastructure to be put in place that will help the U.S. be seen as a responsible gas producer, and help products be more marketable overseas.
Demand for natural gas continues will grow with the closure of coal and nuclear plants. The U.S. is now looking at about 37 gigawatts (GW) of coal-fired power retirements by 2025. This year, nuclear retirements have grown from about 9 GW to 11 GW expected by 2025. There are enough industrial projects under construction to increase natural gas demand by another 250 million cubic feet per day by the end of this year. In addition, natural gas exports to Mexico are up and have increased about 15% from last year and are expected to grow as more pipelines are completed.
NGLs
NGL production actually grew about 7% last year as a result of increased gas recovery and less flaring. NGL production recovery has outpaced crude oil, primarily because of increased demand from the petrochemical sector. Three additional ethane crackers are being constructed in the U.S., which will further strengthen demand.
U.S. NGL production is forecasted to reach 7 million barrels per day (BBL/d) if oil prices remain at or above $55 per barrel and is expected to be 6 million BBL/d if oil remains at $45. Last year, 24 gas fractionation trains were completed last year, adding about 4.4 Bcf/d of capacity. An additional 11 trains this year will take total capacity to 166 Bcf/d. Several fractionation projects were put on hold or deferred last year, although these are expected to regain traction in coming years.
LNG
A number of LNG production trains came online last year, although no new construction was started in the U.S. U.S. LNG exports took a dive last year, but are expected rise by more than 3 Bcf this year. Soaring Asian demand is causing a boost in feed gas to LNG production facilities. "Overall, growing demand will boost the average exports in 2022 to 10.2 Bcf, which is a huge improvement over what we've seen in the past couple of years," said Mullins, who highlighted the LNG projects that he sees as having the best chance of moving forward in the future.
While only one North American LNG project reached a positive financial investment decision (FID) last year, the door is open for FIDs on additional projects this year.
Mullins also discussed the outlook for pipeline buildout, which is expected to slow but still be active with strong natural gas demand. A great deal of capacity additions is being filled by compressor additions.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
Among the headwinds are regulatory uncertainties from the Biden administration and a new emphasis from investors on environmental, social and governance (ESG) policies. As the activity in the midstream sector slowed drastically last year as natural gas demand declined, this year, midstream operators are on focused on renegotiating contracts and are plowing capital into increased returns rather than expansion.
U.S. natural gas production is expected to rise to 94 billion cubic feet (Bcf) next year and reach 100 Bcf by 2024.
Oil and gas production rigs in the U.S. remain 40% lower than pre-COVID levels, although there has been an emphasis on more natural gas takeaway capacity and less flaring. This can definitely be seen in the Permian Basin. The Whistler Pipeline, which is set to go into service this year, will further improve natural gas takeaway capacity in the U.S.' most prolific basin. The Haynesville already boasts some of the lowest-carbon natural gas in the world, but additional infrastructure is needed in the Bakken Shale to further minimize flaring. Mullins said there's about $1.8 billion in gas-gathering infrastructure to be put in place that will help the U.S. be seen as a responsible gas producer, and help products be more marketable overseas.
Demand for natural gas continues will grow with the closure of coal and nuclear plants. The U.S. is now looking at about 37 gigawatts (GW) of coal-fired power retirements by 2025. This year, nuclear retirements have grown from about 9 GW to 11 GW expected by 2025. There are enough industrial projects under construction to increase natural gas demand by another 250 million cubic feet per day by the end of this year. In addition, natural gas exports to Mexico are up and have increased about 15% from last year and are expected to grow as more pipelines are completed.
NGLs
NGL production actually grew about 7% last year as a result of increased gas recovery and less flaring. NGL production recovery has outpaced crude oil, primarily because of increased demand from the petrochemical sector. Three additional ethane crackers are being constructed in the U.S., which will further strengthen demand.
U.S. NGL production is forecasted to reach 7 million barrels per day (BBL/d) if oil prices remain at or above $55 per barrel and is expected to be 6 million BBL/d if oil remains at $45. Last year, 24 gas fractionation trains were completed last year, adding about 4.4 Bcf/d of capacity. An additional 11 trains this year will take total capacity to 166 Bcf/d. Several fractionation projects were put on hold or deferred last year, although these are expected to regain traction in coming years.
LNG
A number of LNG production trains came online last year, although no new construction was started in the U.S. U.S. LNG exports took a dive last year, but are expected rise by more than 3 Bcf this year. Soaring Asian demand is causing a boost in feed gas to LNG production facilities. "Overall, growing demand will boost the average exports in 2022 to 10.2 Bcf, which is a huge improvement over what we've seen in the past couple of years," said Mullins, who highlighted the LNG projects that he sees as having the best chance of moving forward in the future.
While only one North American LNG project reached a positive financial investment decision (FID) last year, the door is open for FIDs on additional projects this year.
Mullins also discussed the outlook for pipeline buildout, which is expected to slow but still be active with strong natural gas demand. A great deal of capacity additions is being filled by compressor additions.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
