This year, the United States has become the world’s largest exporter of liquefied natural gas (LNG) while deliveries to energy-starved buyers in Europe and Asia increased. During the current year, five developers have signed more than 20 long-term agreements to supply more than 30 million metric tons/year of LNG, or approximately 4 billion cubic feet/d, to buyers in need of energy in Europe and Asia.
Unfortunately, while the United States has the world’s largest backlog of nearly shovel-ready liquefied natural gas projects, take-home constraints, including limited pipeline capacity, are seen as the biggest impediment to the growth of the sector. In the Appalachian Basin, the nation’s largest gas-producing region producing more than 35 billion cubic feet a day, environmental groups have repeatedly halted or slowed pipeline projects and limited growth in the northeast. In effect, EQT Corp. (NYSE: EQT) CEO Toby Rice recently acknowledged that Appalachian pipeline capacity had “hit a wall.”
Fortunately, the Permian Basin and Haynesville Shale are still able to support much of the expected LNG export growth, including pipeline development. East Daley Capital Inc. analysts predicted that US LNG exports will reach 26.3 billion cubic feet per day by 2030 from their current level of nearly 13 Bcf/d. For that to happen, analysts say an additional 2-4 bcfd of takeout capacity would need to come online between 2026 and 2030 in Haynesville.
And it looks like the United States is up to the task.
According to RigZone, initial findings from Westwood’s upcoming onshore pipeline market forecast revealed that between 2022 and 2028, the world will spend ~$369 billion on 310,000 km of new oil and gas pipelines, with North America taking the lion’s share. Forecasts indicate that 205,000 km, or two-thirds of the total installations, will be gas pipelines, with several projects already underway in the United States. Related: Is This the Next Big Step for Geothermal Energy?
Heavy investments in O&G pipelines are also planned in China as the country seeks to boost imports, including the West-East Gas Pipelines 4 and 5 (6,323 km combined) and the Xinjiang Coal-to-Gas Pipeline (8,372 km). ). Strong activity is also expected in Eastern Europe and FSU, driven by the construction of additional pipeline capacity in Russia to serve Asian markets. In Africa, the project 6,500 km-Central Africa Pipeline System designed to connect 11 countries and improve energy security in the region could potentially mark one of the largest pipeline projects on the continent.
US gas projects in the pipeline
According to the Federal Energy Regulatory Commission (FERC), four LNG projects in the United States are currently under construction, and 12 more have received regulatory approval from federal regulators, while four more have been proposed, totaling 40 Bcf/d of potential LNG exports.
The Pivotal Permian Basin is preparing to unleash a torrent of gas and gas projects to respond to the explosion of LNG and nat. gas demand. LP Energy Transfer (NYSE: ET) seeks to build the next great pipeline to transport natural gas production from the Permian Basin. The company is also working on the Louisiana-based Gulf Run Pipeline, which will transport gas from Haynesville Shale in Texas, Arkansas and Louisiana to the Gulf Coast.
Last May, a consortium of oil and gas companies, namely WhiteWater Midstream LLC, Intermediate EnLink (NYSE: ENLC), Devon Energy Corp. (NYSE: DVN) and MPLX-LP (NYSE: MPLX) announced that they have made a final investment decision (FID) to proceed with the construction of the Matterhorn Express Gas Pipeline after securing sufficient firm transportation agreements with shippers.
According to the press release, ”The Matterhorn Express pipeline was designed to transport up to 2.5 billion cubic feet per day (Bcf/d) of natural gas through approximately 490 miles of 42-inch pipeline from Waha, Texas to the Katy area near of Houston, TX. Supply from the Matterhorn Express pipeline will come from several upstream connections in the Permian Basin, including direct connections to processing facilities in the Midland Basin via an approximately 75-mile lateral, as well as a direct connection to the Agua Blanca of 3.2 billion cubic feet / d. Pipeline, a joint venture between WhiteWater and MPLX.”
Matterhorn is expected to be commissioned in the second half of 2024, pending regulatory approvals.
WhiteWater CEO Christer Rundlof touted the company’s partnership with the three pipeline companies in the development “further transportation of gas out of the Permian Basin as production continues to grow in West Texas.” Rundlof says Matterhorn will provide “premium market access with superior flexibility for Permian Basin shippers while playing a critical role in minimizing flared volumes.”
Matterhorn joins a growing list of pipeline projects designed to capture growing volumes of Permian supply to send to downstream markets.
WhiteWater has revealed plans to expand the Whistler pipelinefrom approximately 0.5 Bcf/d, to 2.5 Bcf/d, with three new compressor stations.
MPLX has several other expansion projects under construction. The company says it expects to complete construction of two processing plants this year and recently made a final investment decision to expand its Whistler pipeline.
Also in May, Kinder Morgan Inc. (NYSE: KMI) kicked off opening season to gauge shippers’ interest in expansion 2.0 Bcf/d Gulf Coast Express Pipeline (GCX).
In the meantime, KMI has already completed a binding open season for the Permian Highway Pipeline (PHP), with a base shipper already in place for half of the planned expansion capacity of 650 MMcf/d.
In an effort to increase LNG exports to the European Union to avert an energy crisis amid Russia’s war on Ukraine, the U.S. Department of Energy has additional authorized LNG exports the future Golden Pass LNG terminal in Texas and the Magnolia LNG terminal in Louisiana.
Co-ownership of Exxon Mobil (NYSE:XOM) and Qatar Oilthe $10 billion Golden Pass LNG export project is expected to become operational in 2024, while Magnolia LNG, owned by the Glenfarne Group, will be commissioned by 2026. The two terminals are expected to produce more than 3 billion cubic feet per day of natural gas, although Magnolia has not yet signed contracts with its customers.
Previously, US LNG developers were unwilling to build self-funded liquefaction facilities that are not secured by long-term contracts with European countries. However, the war in Ukraine has revealed the soft underbelly of Europe and the harsh reality forces them to rethink their energy systems. Namely, Germany, Finland, Latvia and Estonia have recently expressed interest in moving forward with new LNG import terminals.
Meanwhile, DoE approved expanded permits for Energy Cheniereof (NYSE: LNG) the Sabine Pass terminal in Louisiana and its Corpus Christi plant in Texas. The approvals allow the terminals to export the equivalent of 0.72 billion cubic feet of LNG per day to any country with which the United States does not have a free trade agreement, including any Europe. Cheniere says the facilities are already producing more gas than covered by previous export permits.
By Alex Kimani for Oilprice.com
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