US Gulf Coast gas infrastructure may struggle to keep pace with LNG, power growth

Midstream companies are advancing new storage and pipeline projects along the Gulf Coast as a wave of LNG and power developments drives expectations for sharply higher natural gas demand over the coming decade, speakers said Oct. 14 at the Gulf Coast Energy Forum in New Orleans.

But analysts and some of the developers behind those projects said the industry's infrastructure buildout may still struggle to keep pace with expected demand growth.

"We need more storage," ConocoPhillips analyst James Pearson said, adding natural gas markets are becoming more volatile as demand growth continues to outpace development of the supporting infrastructure. "And we need more interstate pipelines."

Gulf Coast LNG feedgas demand is expected to rise to about 35 Bcf/d by 2031, more than double 2025 levels, according to S&P Global Energy CERA's latest North American gas outlook. LNG exports are expected to account for roughly 80% of the region's projected demand growth over the period.

That growth is increasing the value of storage, which gives LNG exporters a place to temporarily hold gas when maintenance, operational problems, severe weather or other disruptions reduce feedgas demand.

Developers said the changing market is already reshaping investment decisions across the Gulf Coast.

"The need for storage has changed," Enbridge's Elizabeth Perez, director of business development, said. "It's not a seasonal need anymore. It's not just the marketers participating. You have LNG players participating in a big way."

Enbridge is expanding storage capacity at its Tres Palacios, Moss Bluff and Egan facilities while also marketing the proposed Katy-to-Gillis Expansion Project, which could provide up to 2 Bcf/d of transportation capacity from the Katy Hub to growing demand centers in southwest Louisiana.

The project is being developed in coordination with the Mustang Express Pipeline, whose planned Cougar Lateral would connect Tres Palacios Gas Storage to Katy Hub.

It is among several intended to link growing Permian gas production and Gulf Coast storage capacity to downstream demand across the US Gulf Coast.

Fellow developer Gulf Coast Midstream Partners is also marketing capacity at its proposed Nash Storage Hub in Texas, targeting demand from power generators, LNG facilities and other consumers in the region. The project's first phase would provide 23 Bcf of working gas capacity, along with 900 MMcf/d of injection capacity and 1.5 Bcf/d of withdrawal capacity.

The Nash hub would be the first new salt-cavern natural gas storage project developed on the Texas Gulf Coast in about two decades, Gulf Coast Midstream Partners CEO Edmund Knolle said.

"Salt cavern storage has been very slow to catch up to the growing market," Knolle said. "And even with the expansions -- the real expansions that are out there -- we're not going to be keeping up by 2030."

East Daley Analytics analyst Jack Weixel said storage could become particularly valuable as LNG export volumes increase, pointing to the potential impact for a major Gulf Coast hurricane to knock LNG export terminals concentrated in the region offline.

"How much storage capacity do you have if that event lasts seven days?" Weixel said. "There's not enough storage, especially at the end of an injection season."