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Washington — The US energy sector is piecing together an infrastructure puzzle to connect booming onshore oil and natural gas production with export markets around the world.

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The pipeline buildout from the Permian and Williston basins is well underway, and the next missing piece is at the water's edge, mostly in Texas and Louisiana.

By early 2020, US Gulf Coast crude export capacity could approach 8.5 million b/d, and US LNG export capacity stands to climb above 7 Bcf/d, according to an S&P Global analysis. A raft of other proposed LNG terminals could add roughly five times that capacity in the unlikely scenario that they all get built by the middle of the decade, with most of them concentrated in the Gulf Coast.

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Expanded US oil and gas export capacity will increase supply options for energy-hungry Asian markets, influence global price relationships like shrinking the Brent/WTI oil spread, and change how Washington lawmakers conduct foreign policy.

"We are going to have energy partners across the globe that we never thought were possible -- both crude oil and LNG," said Blu Hulsey, senior vice president of government relations and regulatory affairs for major Bakken producer Continental Resources. "It changes the entire geopolitical landscape."

But just as Permian Basin producers faced bottlenecks and disruptions until major new oil pipelines starting coming online this year, the infrastructure buildout at the Gulf Coast could also be bumpy.

A big question is whether the market will winnow the crowded field of projects enough to avoid an overbuild.

US LNG 'JUST STARTING ON SCALING UP'

By the end of 2019, the first liquefaction units of a trio of new export facilities US are expected to come online in addition to the three terminals operating currently.

Those new facilities -- Kinder Morgan's Elba Island LNG in Georgia, the Sempra Energy-led Cameron LNG in Louisiana, and the Freeport LNG Development LP terminal in Texas -- will add about 4 Bcf/d of LNG export capacity by the time all of their production units come online in 2020. That is more than what the country's export capacity was a year ago.

But depressed global prices for LNG in recent months have sparked concern among industry observers that the ramp up could be met by market pressure to curtail or shut-in LNG production and ship fewer exports sold on a spot basis.

As it stands, US LNG supply is likely more resilient to short-term market imbalances than netback economics suggest, said Akos Losz, a senior research associate at Columbia University's Center on Global Energy Policy. Plant operators could time and extend maintenance on production units to avoid periods of weak export economics that could lead to capacity shut-ins.

S&P Global Platts Analytics viewed a shut-in scenario in the near term as unlikely. Positive netbacks forecast in the near term will likely keep LNG flowing at around 95% of nameplate capacity.

Executives of the US LNG export pioneer Cheniere Energy suggested during a May 9 earnings call that even the weak netbacks observed earlier this year were not enough to cause cargoes to shut in.

"There have not been any spot cargoes that haven't cleared the US and made a margin," President and CEO Jack Fusco said, adding that no contracted customers have cancelled picking up a shipment. "We wouldn't expect that at all with where the current gas prices are here in America."

But it is not clear how a production response to low overseas prices could play out once additional LNG export projects are online, said Nikos Tsafos, a senior fellow with the energy and national security program at the Center for Strategic and International Studies.

"We are just starting on scaling up, so you haven't really seen how responsive the system is going to be," Tsafos said. "If you have curtailment of production or exports, what does that do to an oversupplied Gulf already?"

Including only the projects that are online, at an advanced stage of construction, or have already reached a final investment decision, the total US LNG export capacity is on track to top 11 Bcf/d by the mid-2020s.

"Clearly we haven't seen a price response really, yet, from all this pull, so we are still at that point where this is really helpful at absorbing the gas," Tsafos said. "How long will that be the case? Who knows."

Some natural gas market participants outside of the LNG sector have pointed to a separate set of potential growing pains stemming from the new capacity additions such as increased price volatility in the Southeast market and deliverability challenges for other types of gas buyers in the region.

GLOBAL MARKET FACES RISK OF OVERBUILD

As LNG infrastructure building ramps up in the Gulf, further constraints could arise: a tight labor market in the region where other energy industries are booming; bottlenecks with vessel traffic in busy shipping channels; and the storms, flooding and hurricanes in the region that can disrupt construction schedules and operations, Losz said.

But with roughly two dozen proposed projects in the US totaling more than 36 Bcf/d of LNG export capacity, not all will get built.

Robert W. Baird & Co. analyst Ethan Bellamy said there were some important questions to determine which of the second wave of LNG project will succeed. "How much are you willing to stress, lever or extend a balance sheet to make a project work? And how much are financiers willing to allow that?" he said.

The primary challenge facing project developers is landing contracts to underpin their project. The contracts help them reach a final investment decision and build the facilities in time to meet a global supply crunch that a chorus of experts say could hit by the mid-2020s.

"The problem of potentially overbuilding capacity is a global one, not specific to the US," Losz said. "In fact, the US is drowning in gas, and could use any amount of export capacity that can realistically be built in this cycle to lift excess gas from the system. The problem is that there are a lot of highly viable LNG projects outside the U.S. as well, and many of them will probably get the go ahead in the next year or so."

The risk of overbuilding is heightened because some of the biggest companies can commercially sanction LNG projects without securing offtake agreements in advance to support their projects.

"If demand turns out to be disappointing by the time the new projects in the current investment wave are starting to hit the market, then the industry can be in for a prolonged glut later in the next decade," Losz said.

OIL PORTS AIM TO LOAD VLCCs IN 24 HOURS

Platts Analytics projects US crude exports to reach 3.5 million b/d by the end of the year and average 4.5 million b/d in 2020.

Eight proposals for new deepwater oil ports -- not counting expansions of existing onshore terminals -- would create about 16 million b/d in capacity, massively outpacing any projections for US production. Some, if not most, of the projects will have to fall away, potentially leaving one each offshore greater Houston, Corpus Christi and southeastern Louisiana. The projects aim to fully load VLCCs within 24 hours.

The Louisiana Offshore Oil Port is currently the only US port able to fully load VLCCs and ultra large crude carriers without lightering from smaller vessels. LOOP started exporting US crude via VLCC in February 2018, almost 40 years after it opened as the only deepwater terminal for US oil imports.

Enterprise Products Partners is banking on its extensive midstream network to attract long-term customers for its proposed Sea Port Oil Terminal off Freeport, Texas.

"Us having control of that barrel from the field all the way to the dock -- when it comes to maintaining quality and executing what that producer wants us to do with that barrel -- I do think it gives us an advantage," Senior Vice President Brent Secrest said May 1 on the company's first-quarter earnings call.

Texas Gulf Terminals, owned by oil trader Trafigura, is hoping its place at the front of the regulatory line will give it an edge. The project offshore Corpus Christi applied to the US Department of Transportation's Maritime Administration in July 2018, a process expected to take at least a year.

Enterprise applied with MARAD in January, followed by Texas COLT in February.

The Port of Corpus Christi Authority and The Carlyle Group have proposed a joint venture port near Port Aransas, competing for commitments with the nearby Texas Gulf project.

Asked if Corpus Christi will only be able to support one deepwater oil export terminal, Trafigura spokeswoman Victoria Dix said Texas Gulf will "complement, not replace, exports from other facilities."

"Having multiple projects reflects and reinforces the need for the significant infrastructure that will be needed to allow the export of US crude oil," she said.

Continental's Hulsey said the market will sort out these capacity issues in time. Until then, US producers are working to build up their customer bases across the globe. "Competition is good for the entire market," he said.

-- Corey Paul and Meghan Gordon in Washington, and Ross Wyeno in Denver, newsdesk@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com