Demand for LNG feed-gas surges in Southern U.S., reverses pipeline flows

Monday, 01 April 2019

Length in natural gas supply the U.S. Mid-Atlantic and Ohio region is building up amid rising production from the Marcellus and Utica Shale. Simultaneously, growing demand in the South Central region for feed-gas for LNG export facilities on the Gulf Coast has caused a reversal in gas flows on key interstate pipelines. 

U.S. LNG exports are forecast to grow to an average of 14 Bcf/d by 2030. At the same time, pipeline gas exports to Mexico are growing as well as domestic gas consumption for power generation. These three factors combined will turn the South Central Region into the “fastest-growing demand market in the United States,” according to EIA’s Annual Energy Outlook (AEO2019) Reference case.

This trend towards a surge in gas demand in the Southeast has caused a reversal in gas flows. Traditionally, gas from the South Central region, which includes Texas and the Gulf Coast, moved into population centers in the Northeast through either the Eastern Midwest or Southeast
regions. Flows into the Northeast averaged 12 Bcf/d in 2018, but by 2013, these volumes had dropped to 5 Bcf/d, and today the region is a net natural gas exporter, primarily to the Eastern Midwest.

This reversal of flows was enabled by a rise in bi-directional gas transportation capacity on interstate pipelines as well as the opening of new pipelines to cater for rising supplies from Marcellus and Utica Shale. Between 2008 and 2018, pipeline capacity out of the Northeast grew from 5 Bcf/d to 23 Bcf/d, according to EIA estimates.

Looking ahead, the EIA projects that even more gas pipeline capacity beyond what is currently under construction will be built from the Mid-Atlantic and Ohio region, primarily through the Eastern Midwest region.

In the AEO2019 Reference case, an additional 4 Bcf/d of pipeline capacity out of the Northeast will be constructed through 2050. “This capacity is required to realize the growth in dry gas production in the East, and it contributes to growth in both domestic natural gas consumption and LNG exports from the South Central region,” analysts said.

South Central region depends on imports

Though the South Central region itself also contains some shale plays – the Wolfcamp in the Permian Basin and the Haynesville – regional gas consumption outpaces production. To meet rising gas demand for power generation and for liquefaction facilities, the South Central region will have to import more and more gas from neighbouring states in the Eastern part of the United States.

The Appalachian region is likely to supply most of these additional gas needs. Most AEO2019 cases anticipates that total U.S. dry gas production will be driven by continued development of the Marcellus and Utica shale plays in the East.

In the Reference case, dry gas production reaches nearly 120 Bcf/d by 2050, compared with 75 Bcf/d in 2017.