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Gas flows to Cheniere terminals drop to 1 Bcf/d as US cargo cancellations mount

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Houston — Feedgas deliveries to Cheniere Energy's two LNG export terminals fell to around 1 Bcf/d on July 24 – the lowest level in 17.5 months -- as cargo cancellations continue to reduce production at US facilities.

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The US' biggest LNG exporter -- and its biggest individual physical consumer of natural gas before the coronavirus pandemic began to weaken global LNG demand in March – has previously said it was reviewing different options for adjusting operations if market conditions persisted. It has not been more specific.

A spokeswoman declined to comment on whether any of the seven trains in service at Cheniere's two terminals have been taken offline or if the trains are all running at reduced levels. The company is scheduled to release its second-quarter financial results Aug. 6.

Low international prices and demand destruction due to the pandemic have been blamed for the cargo cancellations that began in April and now total at least 157 through September based on S&P Global Platts data, resulting in a sharp drop in utilization at the six major liquefaction terminals on the Gulf and Atlantic coasts.

The July 24 total feedgas deliveries to Cheniere's Sabine Pass terminal in Louisiana and Corpus Christi Liquefaction terminal in Texas were the lowest level since Feb. 6, 2019, Platts Analytics data show. Total deliveries to the six major US liquefaction terminals were just over 3 Bcf/d on July 24, the lowest in more than two weeks. Flows to Freeport LNG in Texas have been at or near zero for 18 consecutive days as of July 24.

Contango in the Dutch TTF forward curve and improving netbacks are incentivizing US LNG cargoes back on the water by late summer or early fall, according to Platts Analytics. However, with East Asian demand continuing to underperform this summer, the risk to winter demand appears to still be biased to the downside. If spot buying on the Platts JKM does not pick up substantially, there's further risk that much of the ramp in US LNG exports will again push back into Europe by mid-winter and pinch spreads in spring 2021.

Multiple developers of new US liquefaction facilities have delayed until next year or beyond final investment decisions on their projects. Tellurian is evaluating the scope of Driftwood LNG and may make changes to the proposed Louisiana export project that significantly reduce the cost of the first phase, while NextDecade is abandoning development of a sixth liquefaction train at its proposed Rio Grande LNG in Texas. It says technology will allow it to achieve the same total capacity with five units if it decides to move forward with the full project.