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In less than a year US Gulf Coast crude export capacity could near 8.5 million b/d and US LNG export capacity exceed 7 Bcf/d a S&P Global analysis concludes. More LNG terminals are proposed that could mean five times greater capacity with most in the Gulf Coast.

Cheniere LNG

Entire geopolitical landscape Changed

"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."

Three new liquefaction units at new export facilities are expected to be up in the by the end of 2019, in addition to the three terminals operating currently.

New facilities

  1. Kinder Morgan's Elba Island LNG in Georgia,
  2. Sempra Energy-led Cameron LNG in Louisiana,
  3. Freeport LNG Development LP terminal in Texas

These three will add about 4 Bcf/d of LNG export capacity by the time all of their production units come online in 2020. For perspective that is more than what the country's export capacity was a year ago.

The risk is, and one the energy markets are familar with is oversupply. Soft global prices for LNG in recent months concerns 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.

us oil and LNG export infrastructure

US LNG supply is likely more resilient to short-term market imbalances  says 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.

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."

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

Source: S&P Global.

From TradersCommunity Research

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