LNG

Kinder Morgan Inc. (KMI), the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure developer, reported lower third-quarter earnings and cash flow, though the new Chief Executive Kim Dang forecast a “bright’ future for the company.

TC Energy Corp., whose current projects include the building of the Coastal GasLink pipeline for LNG Canada, has completed the sale of 40 percent stakes for a total of C$5.3 billion (US$3.9Bln) in two US assets, Columbia Gas Transmission and Columbia Gulf Transmission, transporters of 20 percent of US LNG feed-gas volumes.

Moody's Investors Service, the US credit ratings agency, said that increasing global demand for natural gas is a growth opportunity for US LNG producers, though delivery depends more on the timely construction of natural gas pipeline infrastructure to support new US LNG supplies.

Moody’s said in a research note than Europe's energy crisis, led by the cut-off of Russian supplies to Germany, should keep the LNG market tight until 2025-2026, supporting cash flow generation for US LNG producers.

The report also noted the potential recovery in Chinese domestic demand in 2023 that will bring more competition to the market.

“European demand might accelerate LNG capacity expansion in the US, but that would require long-term offtake commitments from European buyers, even as they are working to reconcile new energy security needs,” said Moody’s.

Most of the announced US LNG growth projects through 2025-2026 have long-term commitments from Asian buyers, the original source of the US LNG boom since the mid-2010s, and international commodity traders stepped up their LNG purchases in 2022.

However, LNG producers require long-term offtake commitments to underpin financing of new LNG infrastructure projects.

Capital allocation

The report stated that LNG projects should in turn spur further capital allocation for constructing new pipeline capacity to connect the largest US gas producing regions and new export infrastructure.

These new pipeline projects will need to win permitting approvals from the US Federal Energy Regulatory Commission.

“Today's peak nameplate capacity of nearly 14 billion cubic feet per day reflects only about one-quarter of the capacity of all announced LNG projects, including several with partial or full FERC approval and 10 bcf per day under construction,” the report added.

The LNG projects include the Corpus Christi plant expansion in Texas and the Port Arthur project as well as others on the Mississippi River and the Brownsville Ship Channel.

Moody’s noted that the Marcellus and Utica shale basins together contributed roughly one-third of US dry gas production, though limited pipeline takeaway capacity has constrained growth for those regions.

In the fourth quarter of 2022, US dry natural gas production stood at 100 bcf, exceeding year-earlier production by 3 percent.

Moody’s said that this was largely due to increased drilling and pipeline expansions in the Haynesville Shale and rising volumes of associated natural gas delivered by oil producers in the Permian Basin.

Several large US LNG projects now under construction will add significant new capacity by the mid-2020s.

Several of the US pipeline giants have already announced projects that will supply gas to LNG infrastructure. They include Williams Company’s Louisiana Energy Gateway, Energy Transfer’s Gulf Run and Kinder Morgan’s Permian Highway Pipeline expansion.

TC Energy and Pembina Pipeline, the North American energy infrastructure and LNG project companies, have entered into a carbon-sequestration evaluation agreement with the Canadian provincial government of Alberta to further evaluate one of the largest areas of interest for safely storing carbon from industrial emissions.

Kinder Morgan Inc., the US pipeline and terminals company and whose earnings measure the wellbeing of the US and oil and gas industry and the growing LNG sector, posted a wider net loss in the second quarter versus the same period of 2020 because of South Texas natural gas issues.

TC Energy, the North American pipeline company whose priority projects now include supplying two LNG export plants in the Canadian province of British Columbia, said it had formally terminated the Keystone XL Pipeline Project to deliver oil from Canada to the US.