LNG

The US Government forecasts that the nation’s liquefied natural gas exports will decline by around 17 percent as 2020 progresses, while overall natural gas output will also drop and nationwide storage will be at record levels by November.

LNG exports are expected to decline from an average 5.8 billion cubic feet per day in the second quarter to 4.8 Bcf per day in the third quarter as a result of lower expected global demand for cargoes, according to the short-term outlook of the US Energy Information Administration.

In cargo terms this would amount to a second-quarter total of about 12 cargoes per week declining to around nine shipments per week in the third quarter, on an average cargo containing 3.6 Bcf of weekly gas production.

In the latest weekly LNG export figures for April 30 to May 6, the EIA had reported 15 cargoes departing from five of the six LNG plants (Sabine Pass, Corpus Christi, Freeport, Cameron and Cove Point) with a combined LNG-carrying capacity of 54 Bcf, or 3.6 Bcf per vessel.

The EIA also expects natural gas production to decline, led by the associated-gas output from the Permian Basin of West Texas and southeast New Mexico and the Marcellus and Utica Shales of the northeast US.

“US dry natural gas production set a record in 2019, averaging 92.2 Bcf per day,” said the EIA.

“The EIA forecasts dry natural gas production will average 89.8 Bcf/d in 2020, with monthly production falling from an estimated 93.1 Bcf/d in April to 85.4 Bcf/d in December,” said the agency.

Natural gas production declines the most in the Appalachian region and the Permian Basin.

“In the Appalachian region, low natural gas prices are discouraging producers from engaging in natural gas-directed drilling, and in the Permian region, low oil prices reduce associated gas output from oil-directed wells,” explained the EIA.

“In 2021, forecast dry natural gas production averages 84.9 Bcf/d, rising in the second half of 2021 in response to higher prices,” it added.

The EIA additionally forecasts that total US working natural gas in storage ended April 2020 at 2.3 trillion cubic feet (Tcf), 20 percent more than the five-year (2015-2019) average.

In the forecast, inventories rise by 2.1 Tcf during the April through October injection season to reach almost 4.2 Tcf on October 31, which would be a record level.

In April, the Henry Hub natural gas spot price averaged $1.73 per million British thermal units and the EIA forecasts that prices will generally rise through the rest of 2020 as production declines.

“Henry Hub natural gas spot prices will average $2.14/MMBtu in 2020 and then increase in 2021, reaching an annual average of $2.89/MMBtu,” said the report.

The EIA expects total consumption of natural gas to average 81.7 billion cubic feet per day (Bcf/d) in 2020, down 3.9 percent from the 2019 average, primarily because of lower industrial sector consumption of natural gas.

“EIA forecasts industrial natural gas consumption to average 21.3 Bcf/d in 2020, down 7.1 percent from 2019 as a result of lower expected manufacturing activity,” said the report.

“This expected decline is lower than the 0.3 percent decline forecast in the April Outlook because of large downward revisions to the macroeconomic forecast in the May Outlook,” it added.

In its crude oil report, the EIA forecasts Brent North Sea oil prices will average $34 per barrel in 2020, down from an average of $64 per barrel in 2019.

EIA expects prices will average $23per barrel during the second quarter of 2020 before increasing to $32 per barrel during the second half of the year.

It then expects that Brent prices will rise to an average of $48 per barrel in 2021, $2 per barrel higher than forecast last month, as the EIA expects that declining global oil inventories next year will put upward pressure on oil prices.

EIA estimates global petroleum and liquid fuels consumption averaged 94.1 million barrels per day in the first quarter of 2020, a decline of 5.8 million b/d from the same period in 2019.

“It expects global petroleum and liquid fuels demand will average 92.6 million b/d in 2020, a decrease of 8.1 million b/d from last year, before increasing by 7.0 million b/d in 2021,’ said the report.

“Lower global oil demand growth for 2020 in the May STEO reflects growing evidence of significant disruptions to global economic activity along with reduced expected travel globally as a result of restrictions related to Covid-19,” it added.

The EIA has revised its current forecast of domestic crude oil production down from the April Outlook as a result of lower crude oil prices.

It forecasts US crude oil production will average 11.7 million b/d in 2020, down 0.5 million b/d from 2019.

“In 2021, the EIA expects US crude oil production to decline further by 0.8 million b/d. If realized, the 2020 production decline would mark the first annual decline since 2016,” stated the report.

“US crude oil production has not declined for two years in a row since the 17-year period of declines beginning in 1992 and running through 2008,” it noted.

“Typically, price changes affect production after about a six-month lag. However, current market conditions will likely reduce this lag as many producers have already announced plans to reduce capital spending and drilling levels,” it explained.

The American shale basins of Marcellus and Utica that underpin rising US LNG exports and domestic gas use contain geological indicators of huge volumes of undiscovered technically recoverable resources of natural gas.

New Fortress Energy, the owner of LNG facilities in Florida and in Jamaica, is attempting to advance with developing an LNG export terminal on the Delaware River in New Jersey for cargo containers produced from two small liquefaction plants in the Marcellus Shale in Pennsylvania.

The US Army Corps of Engineers has reopened a public comment period for the project’s permit as environmental protesters increase pressure to block the project.

The small LNG export terminal permit process is being overseen by the Delaware River Basin Commission (DRBC), a regulatory agency involving four states and the US government that oversees the Delaware River watershed on the Atlantic Coast.

New Fortress affiliate Delaware River Partners in 2017 requested a waterway suitability assessment from the US Coast Guard, saying in a letter that it wanted to construct a multi-use, deep-water port and logistics center for a variety of uses, including the handling of automobiles, other bulk freight, and LNG and liquefied petroleum gas.

The company told the Coast Guard that the terminal would have an LNG export capacity of 1.5 million tonnes per annum and an LPG export capacity of 9.6 million barrels per annum.

The company is developing two small-scale liquefaction projects in the Marcellus Shale Basin in Northeast Pennsylvania that would have a combined capacity of 7.3 million gallons per day, according to filings with the US Securities and Exchange Commission.


The company is led by Wes Edens, co-founder of the private equity group Fortress Investment.

Site work is underway on the first facility in the Marcellus Shale in Bradford County, with construction expected to start in 2020.

A dedicated tanker truck fleet would transport the Marcellus sourced LNG from Bradford County to the Delaware River terminal site for loading and distribution.

Environmental groups claim that the New Fortress subsidiary failed to fully explain its plans for LNG at the proposed facility in Gloucester County, NJ.

The Delaware River project also hopes to use the railroad to bring additional volumes, though this aspect of the venture has yet to be approved by the US Department of Transportation.

New Fortress made its debut on the Nasdaq global exchange in January 2019 after an initial public offering. Its main corporate focus is introducing LNG to markets that lack access to the fuel.

In addition to its 100,000 gallons per day liquefaction plant in Miami, it operates a floating LNG terminal in Montego Bay, Jamaica, along with a fuel-handling facility in the US territory of Puerto Rico.

The Miami facility began operations in April 2016 and enables the company to produce LNG for export in intermodal ISO containers to the Caribbean and to small-scale customers in southern Florida.

In the Marcellus Shale, small-scale LNG facilities are gaining in importance because of the natural gas supply glut. The Marcellus is lacking pipeline transportation so that shale gas production is sometimes shut in rather than being sent into natural gas networks.

Northeast LNG exports are also likely to remain flat at about 700 million cubic feet per day for the foreseeable future as Dominion Energy’s larger single-Train Cove Point export plant in Maryland is fully subscribed.

Enagas, the Spanish natural gas network and LNG terminal owner, has entered the US energy infrastructure market by investing in Tallgrass Energy, whose assets include 11,000 kilometres of transmission pipelines.

The Spanish company said the transaction is part of its strategy to invest in core business assets in growth markets on an international basis alongside strategic partners.

Enagas, which already has investments in LNG import terminals on the American continent, at Altamira in Mexico and Quintero in Chile, has entered into an agreement with the equity funds, Blackstone of the US and GIC of Singapore, to invest $590 million for a 10.93 percent indirect ownership interest in Tallgrass Energy.

Tallgrass, based in Leawood in the Midwest state of Kansas, has assets including the Rockies Express Pipeline, one of the largest US pipelines that is being transformed into the nation’s northernmost bi-directional natural gas gathering system.

Enagas explained that its investment is in the holding company that owns 100 percent of TGE’s general partner, as well as 43.91 percent of the economic interests in TGE .

The investment is structured so that Blackstone retains a majority stake, GIC has a minority shareholding, as does Enagas with 24.90 percent of the holding company.

Following the closing of the transaction, Enagas has agreed to acquire an additional 3.52 percent of the holding company for around $83M, subject to completion of certain conditions. The Spanish company has also agreed to future investments of up to $300M in TGE.

“As an industrial partner, Enagas will have a seat on the company's Board of Directors, contributing its know-how in operating and developing energy infrastructure,” said Enagas.

Enagas has four domestic LNG import terminals around Spain at Barcelona in the northeast, Cartagena in the southeast, Huelva in the southwest and Gijon in the northwest.

It also owns a 50 percent stake in the facility serving the northwest city of Bilbao.

Other investments held by Enagas include its stake in Trans Adriatic Pipeline, part of Europe’s Southern Gas Corridor.

It is also part of a European gas grid group that acquired control of the Greek natural gas transmission operator DESFA.

“Enagas embarked on its internationalisation in 2011 as a part of an ongoing strategy with two main objectives, maintaining the maximum efficiency and security in the operation of the Spanish gas system, and to continue expanding as a company,” it said.

“This international expansion also helps drive the business of other Spanish industrial companies related to the energy sector,” added Enagas.

“This acquisition allows Enagas to unlock the value of its vast experience in developing and operating gas infrastructure and strengthen its position as industry leader and expert,” stated the company.

Wallace Henderson, Senior Managing Director in Blackstone Infrastructure Partners, said he was delighted Enagas had joined the investment consortium.

“With extensive midstream operations around the world, they bring valuable perspectives to Tallgrass that will benefit our investment and we look forward to their contributions,” added Henderson.

TechnipFMC, the Franco-US liquefied natural gas and energy engineering company, said the outlook for its LNG and subsea growth pillars remained favorable as it posted improved results, boosted by the continued ramp-up and expansion of the Yamal liquefaction plant in Russia.

Rising US natural gas domestic consumption and LNG shipments overseas, along with cross-border pipeline exports, are coinciding with increasing production, keeping prices stable even amid relatively low storage levels.

Freeport LNG, the project at Quintana Island in Texas led by US energy entrepreneur Michael Smith, has signed a preparatory accord for a future tolling services agreement with Japanese trading house Sumitomo Corp.

Dominion Energy, the owner of the Cove Point liquefied natural gas export plant on Chesapeake Bay in Maryland, has secured $3 billion in lending commitments from over 20 banks for a three-year term loan that underscored that bankability of LNG.

Texas LNG, one of several LNG export projects being developed on the Gulf Coast near the port of Brownsville, said it was one of the ventures provided with anticipated dates for issuance of an environmental impact statement and a final regulatory deadline under the new speeded-up process.

US regulators have approved commissioning of the first Train at the Freeport liquefied natural gas export plant at Quintana Island in Texas, further boosting Gulf Coast production prospects.