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LNG for exports to make up majority of new US gas demand, analyst says

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LNG for exports to make up majority of new US gas demand, analyst says

The LNG export market will account for roughly 68% of new U.S. natural gas demand over the next five years as additional capacity from Cheniere Energy Inc.'s Sabine Pass LNG export terminal and a handful of other projects under construction come online, according to an industry analyst.

LNG exports are poised to reach 8.5 Bcf/d by 2022, making up 12% of total natural gas demand in the U.S., Ross Wyeno, a senior energy analyst who specializes in natural gas exports at S&P Global Platts Analytics, told attendees of the LDC Gas Forum Southeast in Atlanta. "LNG is by far the fastest-growing demand source," he said during an April 10 presentation.

Wyeno said he anticipates the ramp-up of new export projects to be "fairly consistent," after the first three liquefaction trains at Sabine Pass came online relatively smoothly. Other than a maintenance outage in September and October 2016, most shutdowns at the facility have been part of the normal commissioning process. "Unless there are serious problems with the facility, we don't expect to see full shutdowns as we've seen in the past," Wyeno said.

Sabine Pass pulls roughly 75% of its gas supply through points on Natural Gas Pipeline Co. of America LLC and Cheniere Creole Trail Pipeline LP. While Transcontinental Gas Pipe Line Co. LLC's Gulf Trace expansion is designed to also feed the export facility, Sabine Pass has not pulled gas from the new system since it entered service Feb. 1.

Wyeno said he expects flows for the introduction of fuel gas to the fourth liquefaction train about 150 days after Cheniere affiliates asked FERC for permission to begin commissioning activities on the train, which was sent to the commission in a March 16 letter.

Aside from the fourth train at Sabine Pass, Dominion Resources Inc.'s Cove Point LNG export terminal in Maryland is likely to be the next liquefaction facility to enter the U.S. market. Cindy McGinnis, director of interstate marketing for Dominion Transmission Inc., said the project is 84% complete and on time for a late 2017 in-service date. The developer on April 7 received permission from FERC to begin commissioning the power block at the facility, one of three major components for the overall export project.

Despite the growing industry, U.S. LNG exports face challenges in the global marketplace, the greatest being the risk of "shut-ins" as a supply glut makes U.S. LNG uneconomic, Wyeno said. Although demand could outpace current projections, the chance of U.S. LNG spot cargoes being shut out of the market rises in 2019 and 2020, he said.

As oversupply and a transition toward nuclear power generation in major importing countries like Japan and South Korea could push contracted U.S. volumes into the spot market, Wyeno said. He added that emerging markets, such as Pakistan, will play in increasingly important role in determining demand for U.S. spot cargoes.

S&P Global Platts Analytics and S&P Global Market Intelligence are owned by S&P Global Inc.