LNG export levels from the US are expected to rebound to pre-Covid levels by November, according to the US Energy Information Administration
Roiled by low gas prices, low energy demand and cargo cancellations, US LNG exports are poised to rebound, returning to pre-Covid-19 levels by November 2020, according to the US Energy Information Administration (US EIA).
US EIA estimates that US LNG exports will average over 9.0Bn cubic feet per day (bcfd) from December through February 2021. This is up 183% of September levels, when US LNG exports averaged 4.9 bcfd, and 243% of August levels of 3.7 bcfd.
“Higher global forward prices indicate improving netbacks for buyers of US LNG in European and Asian markets for the upcoming fall and winter seasons,” said the US EIA.
US LNG exporters could benefit from production outages at LNG export facilities in Australia and Norway. “The increased prices come amid expectations of natural gas demand recovery and potential LNG supply reductions because of maintenance at the Gorgon LNG plant in Australia,” said US EIA.
Besides Chevron’s Gorgon LNG plant in Western Australia, Shell’s Prelude FLNG in the Browse Basin will not begin full commercial operations until 2021. Production ceased at Prelude FLNG in early February 2020 following a series of technical issues.
Meanwhile, Europe’s largest LNG export facility – Norway’s Hammerfest LNG – will be out of commission for at least 12 months, following a fire on 28 September. Operator Equinor reported fire damaged the facility’s air intake on one of the plant’s five power turbines, while large amounts of seawater used to extinguish the blaze damaged electrical equipment, cables and other auxiliary systems in the plant.
Covid-19 restrictions and lead times for equipment will likely complicate the repairs.
“Although a lot of inspection work still remains and there is still significant uncertainty, our best estimate now is that it may take up until 1 October 2021 to get Hammerfest LNG back into production,” said plant director Andreas Sandvik.
Hurricane season in US Gulf
With six operational LNG export facilities, with a total liquefaction capacity of 62 mta and another 41 mta under construction, the US is the third largest supplier of LNG behind Qatar and Australia. Some 90% of current US LNG production however is located in Louisiana and Texas, states most affected by severe hurricanes. As the result of the most active Atlantic hurricane season – 27 named storms and counting – mother nature has taken its toll on production at US LNG export facilities.
Following Hurricane Laura, Cameron LNG in Hackberry, Louisiana, remained offline for a month before resuming receiving natural gas for liquefaction. Hurricane Delta, which made landfall about six weeks after Laura, closed the Calcasieu Ship Channel to vessel operations.
As a result of the US Coast Guard and the Lake Charles Pilots opening the channel to vessel traffic, Cameron LNG reported on 23 October that it began LNG cargo loading operations and continues to make progress towards resuming normal operations.
“The most active Atlantic hurricane season – 27 named storms and counting – has seen mother nature take her toll on US LNG production”
On top of a busy hurricane season, US LNG exports have fallen victim to energy demand destruction caused by Covid-19 and the pricing advantages enjoyed by competitors.
“Existing LNG production capacity in the US has been impacted by the pandemic,” said Drewry Maritime senior research analyst in gas shipping Aman Sud in an August report. “Over 110 LNG cargoes [were] cancelled by Asian and European customers during June-August due to the low LNG spot price, which narrowed the US-Asia and US-Europe price arbitrage,” he said.
Qatar, which is plowing ahead with its plans for the North Field East expansion, enjoys a major cost advantage and tonne-mile advantage over the US, with a break-even price below US$2 per MMBtu and its close proximity to the Asian market, noted Mr Sud.
Since US LNG exports began in 2016, LNG carriers have utilised the expanded Panama Canal, trimming voyages to Asia by tens of days and thousands of tonne-miles, as compared with a route via the Suez Canal. Growth in LNG shipping traffic has grown hand-in-hand with US LNG exports, which began in 2016. As a result, the LNG shipping segment now represents 12% of transits of the expanded canal, according to recent traffic figures from the Panama Canal Authority.
Travelling southbound from the Atlantic to the Pacific Ocean in August, LNG carrier SK Resolute made the 10,000th Neopanamax transit of the expanded Panama Canal since its opening in June 2016.
Driven by the shale gas boom, rising Asian demand and higher global LNG prices, US LNG exports prospered between 2017 and 2019. The US exported 3.9M tonnes of LNG in 2016, increasing at a whopping 114% CAGR to 38.2M tonnes in 2019, said Mr Sud.
While Poten & Partners expects global LNG demand to fall about 6M to 7M tonnes this year, as a result of the Covid-19 pandemic, it estimates demand will begin recovering in 2021 and 2022. LNG demand is already recovering in China, with expectations that it will surpass last year’s record total, with 65M to 67M tonnes of imported LNG, according to a Reuters report.
Longer-term demand in Asia and the continued global drive towards cleaner fuels to combat climate change will allow LNG demand to reach 480M tonnes per year by 2030 – up from 360M tonnes in 2019, says Poten & Partners.
New US production capacity is coming online to meet that demand, but Covid has delayed FID for all but two US ‘second-wave’ LNG projects: Golden Pass LNG and Calcasieu Pass LNG. Located in Sabine Pass, Texas, the US$10Bn Golden Pass LNG is owned by Qatar Petroleum and ExxonMobil. With a nameplate capacity of 16 mta per year from three trains, five existing 155,000 m3 storage tanks and two marine berths, Golden Pass LNG is expected to begin commercial operations in 2024.
Meanwhile, Venture Global LNG’s Calcasieu Pass LNG in Cameron, Louisiana, will have 18 trains, each with a capacity of 0.626 mta, two storage tanks with capacities of 200,000 m3 each, and two marine berths able to accommodate LNG carriers up to 185,0003. Baker Hughes is building the mid-scale, modular liquefaction trains.
|Delayed FIDs North American LNG Projects|
|Project||Location||MMt/y||Original FID||New FID||In service||Operator|
|Port Arthur||Port Arthur, Texas, USA||13.5||2020||2021||2024||Sempra|
|Energia Costa Azul||Ensenada, Mexico||2.5||Q1 2020||Q3 2020||2024||Sempra|
|Corpus Christi Phase 3||Corpus Christi, Texas, USA||10||2020||2024||Cheniere|
|Woodfibre LNG||Squamish, BC, Canada||2.1||2020||2021||2024||Pacific Oil & Gas|
|Rio Grande LNG||Brownsville, Texas, USA||27||2020||2021||2024||NextDecade|
|Driftwood LNG||Lake Charles, Louisiana,, USA||27.6||2020||2021||2024||Tellurian|
|Freeport Train 4||Quintana, Texas, USA||4.5||2020||2021||2024||Freeport LNG|
|Plaquemines LNG||Calcasieu Pass, Louisiana, USA||10||2020||2024||Venture Global|
|Goldboro LNG||Nova Scotia, Canada||10||2020||2021||2023||Pleridae Energy|
|Lake Charles LNG||Lake Charles, Louisiana, USA||16.45||2020||2021||2025||Energy Transfer|
|Annova LNG||Port of Brownsville, Texas, USA||6||Q2 2020||Delayed||2024||Excelon|
|Commonwealth LNG||Cameron, Louisiana, USA||8.4||Q1 2021||Delayed||2024||Commonwealth LNG|
|Source: Poten & Partners, company reports & websites|