US LNG export plants along Gulf Coast may consider shut-ins in future as volumes surge

Tuesday, 04 February 2020
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With liquefied natural gas prices hitting historic Northern Hemisphere winter season lows in the Atlantic Basin and the Pacific Basin, it is likely in the year ahead that US exports in particular will be more price sensitive with the possibility of shut-ins along the Gulf Coast of Louisiana and Texas.

With European prices at around $3.50 per million British thermal units, $4 per MMBtu less than in previous years, and the futures price for the Japan-Korea Marker for North Asia at $4.00 per MMBtu or less for March 2020, US liquefaction plant owners will be considering curtailing additions to the over-supplied market.

That is despite the fact that margins are helped by a US Henry Hub benchmark price being below $2.00 per MMBtu for much of January.

The LNG supply glut has been exacerbated by milder than normal winter weather from London to Beijing.

Henry Hub benchmark prices have also been weather-affected in the Lower 48 states.

The Elba Island liquefaction plant in the state of Georgia in December 2019 became the sixth US export facility to start up and loaded its first cargo.

Elba Island is a small-scale facility unlike the four along the Gulf Coast. The fifth at Cove Point in Maryland, owned by Dominion Energy, and like the Georgia plant located on the Atlantic Coast, is the next smallest with 5.2 million tonnes per annum of output compared with 2.5 MTPA at Elba Island.

Apart from these two plants, others in operation and planned have or will have output of over 20 MTPA and will be more price-sensitive as regards contracts and tolling agreements, making shut-ins more likely.

The other four US LNG plants in operation are Sabine Pass in Louisiana and Corpus Christi in Texas, both owned by Cheniere Energy, the Sempra Energy-owned Cameron LNG in Louisiana and the Freeport plant at Quintana Island in Texas.

Elba Island owner Kinder Morgan is also building a second LNG terminal in Mississippi called Gulf LNG with equity fund investors and other developments are making progress in the Gulf Coast states.

The Kinder Morgan project near Pascagoula has received all FERC approvals.

The existing Gulf import terminal has storage and jetty infrastructure and is to be transformed into a liquefaction plant to produce an initial 11.5 MTPA of LNG for export.

The facility is located next to the Bayou Casotte Navigation Channel and includes a five-mile send-out pipeline and two LNG storage tanks, each with a capacity of 160,000 cubic metres.

In addition there are half-a-dozen other large plants under development, including around Brownsville in Texas, led by companies such as NextDecade and Texas LNG, as well as Sempra at Port Arthur and Qatar Petroleum with Golden Pass LNG.

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