Terminal utilization high as new liquefaction projects gain steam
Utilization at US liquefaction terminals remained high and momentum for adding new capacity around the middle of the decade increased during the week to May 3, even as FOB Gulf Coast cargo values fell for the fifth straight week.
S&P Global Commodity Insights assessed the Platts Gulf Coast Marker for US FOB cargoes loading 30 to 60 forward at $20.300/MMBtu on May 3, down $2.250/MMBtu week on week. Northwest Europe remained the best netback.
GCM has fallen by almost two-thirds since its March 4 record high of $58.250/MMBtu, though the current level remains three times higher than a year ago. Cargoes have flooded the Atlantic Basin as the war in Ukraine led to fears of gas supply disruptions in Europe.
Netbacks to the Gulf Coast remain strong, even with rising US feedgas costs. The NYMEX Henry Hub prompt-month contract was trading nearly 70 cents higher at $8.03/MMBtu as of afternoon in New York on May 3. Persistently sluggish production numbers and higher-than-normal demand have increased supply concerns, as expectations of a hot summer demand season complicate the potential for injections to close the storage deficit before winter 2022-23.
In the week of April 26-May 3, US LNG export facilities nominated 12.2 Bcf/d of feedgas on average, a similar amount compared with the previous week. Overall, in April, US Gulf facilities nominated 4.6% less feedgas than in March, amid shoulder-season scheduled maintenance at Freeport LNG in Texas and Sempra Energy’s Cameron LNG in Louisiana.
Meanwhile, amid high spot prices in end-user markets, there has been a flurry of commercial activity during the first several months of 2022 tied to current and proposed US LNG export terminals, which offer long-term contracts with fixed fees and destination flexibility. That activity continued during the most recent week. French utility Engie agreed to a 15-year deal to buy 1.75 million mt/year of supply on a free-on-board basis from NextDecade’s proposed Rio Grande LNG export facility in Texas, while Swiss commodity trader Gunvor agreed to a 20-year FOB deal to buy 2 million mt/year of supply from Energy Transfer’s proposed Lake Charles LNG export facility in Louisiana. Both of those deals were announced May 2, with commercial startup targeted for as early as 2026.
Speaking at the Flame conference in Amsterdam on May 3, Cheniere Marketing Vice President for Strategy Andrew Walker said it would be difficult for more new LNG supply projects to come online before the mid-2020s, with the market set to remain tight. Higher global energy demand post-pandemic was also expected to tighten markets, Walker said.
“If we unpick the current balance, we have FIDs such as from Qatar that come to market in the 2025, 2026, 2027 timeframe,” he said. “And then we will see additional FIDs that will come within that wave if those FIDs are made shortly.”
These include Cheniere’s own planned 10 million mt/year midscale expansion project at the site of its Corpus Christi Liquefaction terminal in Texas. An FID on the expansion is expected later in 2022.