US LNG Export Rise Pressures Producers
In the last few months, the US has become a net exporter of natural gas; but with more LNG export terminals set to come on line, the pressure is now on producers to deliver the needed supplies to fill those terminals, GMP FirstEnergy analyst Martin King said October 25.
“The US is evolving into a unique situation where the single largest driver of incremental gas use is exports,” he told GMP FirstEnergy’s market update breakfast. “This has created a tremendous need to expand natural gas supplies to meet expanding gas exports.”
Total domestic demand and exports this year, he said, will average around 79bn ft³/day, but will swell to about 84bn ft³/day in 2018 and climb steadily to more than 95bn ft³/day by 2021, with most of the growth coming from exports, as domestic demand growth – residential, commercial and power generation – is expected to be “middling, at best.”
Pipeline exports to Mexico will see some growth over the near-term, but LNG exports will form the single largest component of increasing exports. From about 2bn ft³/day this year, LNG exports are forecast to climb to nearly 11bn ft³/day by 2021, King said, citing GMP FirstEnergy, US Department of Energy and US Energy Information Administration forecasts.
China is expected to be a major target for LNG exports, as its imports are forecast to climb to 13.2bn ft³/day in 2021 from 4.6bn ft³/day this year, King said. Total global LNG demand is expected to approach 60bn ft³/day by 2021, but slowing additions to global liquefaction capacity after next year suggest that demand will overtake supply capacity as early as 2022.
Hoping to feed this growing export demand are multiple sources which can provide expanded supply, and GMP FirstEnergy’s forecasts suggest supply expansion over the next few years will be the fastest since the late 1960s.
US domestic supply growth is forecast at a modest 400mn ft³/day this year, but is expected to jump to 5.1bn ft³/day next year, before gradually declining to 4.1bn ft³/day in 2021.
Still, King said, it’s unclear whether producers can meet all of the expected growth in demand, while increasing opposition to new pipeline capacity throws into question whether new supplies will even be able to make it to market.
“We will have a good sense by early 2018 as to how much momentum will be behind US gas supply gains for the year,” he said. “The real test of supplies will be to see if [they] can fulfill storage refill and export demand.”
Dale Lunan