Williams will keep annual growth project spending steady at about $1.2 billion through 2026 as it seeks to leverage the scale and strategic location of its pipeline network to benefit from an expected rise in LNG feedgas demand, CEO Alan Armstrong said Sept. 8.
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The operator of the Transcontinental Gas Pipe Line and other US midstream infrastructure has been focusing more heavily on its ties to natural gas and bullish global market fundamentals, including strong netbacks, that have been spurring robust deliveries of gas from the US Gulf Coast to Asia and Europe since lockdowns due to the coronavirus pandemic eased.
Those dynamics have made Williams, which handles about 30% of US natural gas volumes, confident in sustaining its current level of capital spending on natural gas growth projects over the next five years, even as it also works to cut its carbon emissions and invests in energy transition opportunities, Armstrong said during a webcast presentation at a Barclays energy conference.
"The rest of the world is continuing to utilize natural gas as a low cost and clean fuel, and so we think the export business is going to continue to grow pretty dramatically," Armstrong said.
S&P Global Platts Analytics forecasts that average annual US LNG feedgas demand will increase from 10.9 Bcf/d this year to 14.9 Bcf/d in 2026. Currently, there are six major LNG export terminals in operation in the US. That total will rise to seven next year and eight by the middle of the decade, based on what's already under construction. Four or more new export terminals could be sanctioned by the end of next year, based on projects that have already announced firm commercial support.
In July, Williams closed a deal to acquire Sequent Energy Management, North America's seventh-largest natural gas marketer. In doing so, it boosted its gas pipeline marketing footprint to more than 8 Bcf/d and increased its exposure to growing US LNG exports.
Sequent, which moves gas through transportation and storage agreements on strategically located infrastructure, including Transco, complemented the geographic footprint of Williams' core pipeline transportation and storage business. The addition also allowed Williams to access new markets to reach incremental gas-fired power generation, in addition to LNG exports and future renewables opportunities.
Separately, Williams is ahead of schedule on its Leidy South project and continues to work to control costs on the project, Armstrong said.
The Transco expansion is designed to connect Appalachian Basin natural gas supplies with downstream markets. Some 125 MMcf/d of capacity from the Leidy South project was brought online in November 2020, with the remaining 457 MMcf/d expected to be complete this year, according to Williams.
Williams is dependent on other factors that it can only partially control, such as takeaway capacity out of the US Northeast. That could impact the current growth trajectory of its gathering and processing business.
"Leidy South is an important element of that as well as Regional Energy Access," Armstrong said. "The Mountain Valley Pipeline coming on would also open up throughput to the South. And there remains capacity to get out on the western end into both Rover and Nexus."
The company is also mindful that, despite the positive economics that have boosted its overall business, future natural gas market fluctuations could change the equation and impact midstream volumes.
"We may still see that if prices remain very stubbornly high like they are right now, we may see some impact to the power gen market and would fully expect that," Armstrong said. "But I remind people that what we sell as Williams on our pipelines is we sell capacity. And, so, we're not sensitive to the immediate fluctuations in power gen load nor are we really impacted by the utilization of the gas plant. What we are impacted by is the utilities buying -- continuing to buy capacity."