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Another first for US LNG exporters as six facilities receive gas same day

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Another first for US LNG exporters as six facilities receive gas same day

Highlights

Four terminals producing, two more preparing to start up

Activity a demand driver for midstream, upstream sectors

Houston — Gas deliveries were observable Wednesday at all six US LNG export facilities in the Lower 48 states, the first time that has happened as America is poised to increase its share of the global supply market, S&P Global Platts Analytics data showed.

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Four of those facilities are currently operating, following Cameron LNG's startup Tuesday in Louisiana, and two more are preparing to begin production - Kinder Morgan's Elba Liquefaction in Georgia and Freeport LNG in Texas.

Combined, total LNG feedgas demand from all six fully operational LNG terminals could be upwards of 11.3 Bcf/d, Platts Analytics data showed. Total deliveries set a new record of 5.9 Bcf/d on May 12 and were near that level on Wednesday, with all six facilities reporting incoming gas deliveries, albeit tiny in Elba's case.

US LNG market growth will depend on the utilization of those facilities, as well as the success of a dozen other second-wave projects that are actively being developed for service in the early- to mid-2020s.

The increased activity will provide new outlets for gas supplies from US shale drillers in key Gulf Coast, Midcontinent and Northeast basins. A proposed West Coast facility, if built, would be able to tap Rockies gas production. US midstream operators will also benefit as pipeline volumes are expected to get a lift.

With the startup of LNG production at Cameron LNG, feedgas deliveries to the facility are expected to ramp up there in the days ahead. Majority owner Sempra Energy said the first commissioning cargo would be loaded in the coming weeks. Project officials said during a tour of the facility in February that the number of commissioning cargoes that are shipped before commercial service begins could range from one to seven, depending on customer needs.

Netbacks from the Platts JKM, the benchmark price for spot-traded LNG in Northeast Asia, to the Cameron LNG export facility were estimated at just over $1.10/MMBtu on Tuesday, down roughly 30 cents/MMBtu since the beginning of the month, largely due to weakening bids in Asia and rising Atlantic Basin day rates. Despite this drop, the JKM has maintained a roughly 60 cent/MMBtu premium over the UK's National Balancing Point, suggesting that initial exports from Cameron will be incentivized to deliver into the Asian markets.

This trend is also demonstrated by the forward markets, which indicate that the JKM netback will continue to outpace the NBP netback through late-summer, Platts Analytics data showed.

Besides Cameron LNG and the two export facilities preparing to start up, Cheniere Energy operates Sabine Pass in Louisiana and a terminal near Corpus Christi, Texas. Dominion Energy operates Cove Point in Maryland.

-- Harry Weber and Emmanuel Corral, newsdesk@spglobal.com

-- Edited by Christopher Newkumet, newsdesk@spglobal.com