Displaced US LNG cargoes help stimulate incremental coal-to-gas generation switching

Houston — At least nine cargoes may have been lost to the global market during the month that Sempra Energy's Cameron LNG has been offline, S&P Global Platts Analytics data show.

The displacement is weighing on US natural gas prices that on Sept. 25 remained moderately below the level they were trading at when Hurricane Laura knocked out power to the Louisiana terminal.

Such low outright prices have prompted gas' share of fossil fuel-fired generation across the US to hit the highest levels since late May.

The three-train terminal with a peak capacity of 15 million mt/year that straddles the border between Cameron and Calcasieu parishes shut down Aug. 26 ahead of Laura's landfall the following day. The operator said Sept. 18 that partial power had been restored to the facility, allowing it to begin testing equipment. It has not provided an update since then, and a spokeswoman did not respond to multiple messages seeking comment in recent days.

As of Sept. 25, utility Entergy had restored power to the majority of customers that were impacted by the storm. In a statement, however, it said some homes or businesses may have sustained damage that would prevent them from safely taking service. Cameron LNG has not disclosed a detailed assessment of the damage the terminal sustained, beyond saying the terminal took a big hit but structurally weathered the storm well.

Beyond the uncertainty over getting back to full power, the storm also caused disruptions along the intracoastal waterway that serves the liquefaction terminal. A dredging operation in the channel may not be complete until early- to mid-October. That could impact cargoes, even if some operations at the terminal resume between now and then. Sempra CEO Jeffrey Martin has said it could be the end of October before full operations at Cameron LNG are back online.

Due to the lost demand from Cameron LNG over the 31 days it had been offline as of Sept. 25 and milder-than-normal temperatures, gas prices across much of the US came under pressure. That, in turn, stimulated incremental demand in the power sector through increased coal-to-gas switching.

Benchmark Henry Hub cash prices have averaged $1.93/MMBtu so far in September, down 13% month on month, while hitting a low of $1.34/MMBtu on Sept. 22. Such outright weakness prompted gas' share of the US fossil fuel-fired generation stack to average near 70% in recent days, its highest level since late May.

According to Platts cFlow vessel-tracking data, nine cargoes were shipped from Cameron LNG in August. Thus, assuming a similar run-rate in September, Platts Analytics estimates at least nine cargoes were lost to the market so far during September due to the ongoing outage.

Even with the outage at Cameron LNG and an ongoing maintenance outage at Dominion Energy's Cove Point terminal in Maryland, total US feedgas deliveries have ramped up in recent days. Feedgas deliveries totaled about 6.5 Bcf/d Sept. 25, up from 6.1 Bcf/d a day earlier, Platts Analytics data show.

Stronger netbacks from deliveries to European and Asian markets are incentivizing additional uncontracted US LNG export capacity to dispatch.