U.S. LNG Feedgas Demand Surges as Export Capacity Additions Continue
RBN Energy, LLC 4/5/21
Excerpt. Link to full article. https://rbnenergy.com/such-great-heights-us-lng-feedgas-demand-surg...
If there’s one word that sums up the U.S. LNG export market over the past year, it’s resilience. After taking a pummeling last year, feedgas demand and exports have roared back, reaching new heights in recent weeks, and are headed still higher in the coming months as new liquefaction capacity is commissioned at a faster pace than expected. Train 3 at Cheniere Energy’s Corpus Christi LNG facility came online on March 26, increasing U.S. LNG export capacity to 75 MMtpa (~9.9 Bcf/d), which equates to a total feedgas demand of nearly 11 Bcf/d. Two more export projects — 18 modular trains at Venture Global’s new Calcasieu Pass facility and the sixth train at Cheniere’s existing Sabine Pass — are on track to ship their first commissioning cargoes later this year, ahead of their originally proposed construction schedules, and will be fully operational in 2022. This is quite a different picture from last year, when nothing but uncertainty loomed on the horizon in a COVID-hit world and progress for just about every project was in jeopardy. In today’s blog, “Such Great Heights – U.S. LNG Feedgas Demand Surges as Export Capac...,” Lindsay Schneider starts a short series providing an update on the status of operational and under-construction export capacity and where LNG feedgas demand is headed this year.
Thanks for posting. I was wondering about exports after reading an article about a troubling 2020.
The market is considerably improved and should only get better this year and next. The problem for those companies needing to make a Final Investment Decision in 2021 is how much considerable new capacity already under construction globally will impact LNG prices mid-decade.
Such Great Heights, Part 2 - U.S. LNG Outlook: Feedgas Demand Headed to 12 Bcf/d in Late 2021
Monday, 04/12/2021Published by: Lindsay Schneider rbnenergy.com
After a roller coaster over the past year, U.S. LNG feedgas demand has been holding steady at record levels of around 11 Bcf/d for nearly a month now, with the exception of a few days due to pipeline maintenance. With Train 3 at Cheniere Energy’s Corpus Christi Liquefaction facility online and price spreads to global markets favorable for U.S. exports, that’s where it’s likely to stay, except for maintenance periods — at least until new liquefaction trains start commissioning later this year. Two Louisiana projects, Venture Global’s new Calcasieu Pass facility and the sixth train at Cheniere’s existing Sabine Pass terminal, have both indicated that they will begin exporting commissioning cargoes by year’s end — ahead of their originally proposed construction schedules — a prospect that could boost Gulf Coast feedgas demand to even greater heights by the fourth quarter of 2021. In today’s blog, we wrap up this short series with a detailed look at the two projects and implications for LNG feedgas demand this year.
In Part 1, we began with an update of the most recent liquefaction capacity addition — Corpus Christi’s Train 3 on March 26 — and its impact on export capacity and feedgas demand, also putting it in the context of the short history of U.S. LNG and, particularly, the incredible volatility of the past year. This time last year, U.S. LNG export cargoes were being cancelled in droves because of poor economics for the first time ever. As cancellations mounted, a large chunk of U.S. LNG production was shut-in, reducing feedgas demand from what were record levels at the time of around 8.5-9 Bcf/d — about or just below levels consistent with full utilization of operating capacity — to less than 3.5 Bcf/d on average over the summer of 2020. While this was transpiring, however, construction on existing projects continued and 10.35 MMtpa (1.4 Bcf/d) of new export capacity was added, primarily along the Gulf Coast. The addition of Corpus Christi Train 3 last month brings the total U.S. LNG export capacity up to 75 MMtpa (9.9 Bcf/d), which equates to about 11 Bcf/d of feedgas demand across the six operational export terminals. We detailed these terminals and their respective capacities in Part 1; we’ve included the map again here in Figure 1 for reference.
In addition to the already-operational terminals, there are currently three projects under construction: Train 6 at Sabine Pass (blue rectangle and diamond) and two new export terminals, Calcasieu Pass (purple rectangle and dotted diamond) and Golden Pass (pink rectangle and dotted diamond). Of these, the Sabine Pass and Calcasieu Pass projects are gunning to begin producing first LNG later this year and eyeing substantial completion in 2022. Golden Pass is a three-train, 15.6-MMtpa (2.07-Bcf/d) project that is not due to come online until 2024.
We’ll focus on the details and timing of the two more immediate expansions next, leaving the Golden Pass project for another day. (In the meantime, you can refer back to our blog Time Has Come Today for more on Golden Pass. We also closely track all planned and proposed LNG export projects in the RBN LNG Voyager report.)
Sabine Pass Train 6
Sabine Pass Train 6 is the final planned train at the U.S.’s first and largest export terminal. Like all of the previous Cheniere-operated liquefaction trains, it will have a production capacity of 5 MMtpa (660 MMcf/d). The project took FID in June 2019, and at that time, less than 40% of its capacity was secured in long-term Supply and Purchase Agreements (SPAs) — typically, projects aim to have more than 60% secured on the low end. However, Cheniere had other offtake agreements that were not tied to any specific train and indicated that it would assign them to Train 6 if additional sales were not made. The SPAs specifically signed for Train 6 include global portfolio player Vitol and Malaysian consumer Petronas, for a combined offtake commitment of 1.8 MMtpa. Eventually, Cheniere also assigned a non-train specific agreement to Train 6. That’s with Poland’s PGNIG for 1.45 MMtpa, bringing its total contracted capacity up to 3.25 MMtpa, or 65% of the train’s design capacity. It’s worth noting, though, that Cheniere has been operating the trains at its Sabine Pass and Corpus Christi facilities as one fleet, particularly to navigate the tumultuous market environment of the past year (check out the blog, An LNG Market for All Seasons, to see just how wild things can get). Overall, Cheniere has about 85% of its total export capacity across both terminals locked up in SPAs, and it markets the rest of its LNG through its marketing arm.
As for the timing of Train 6 start-up, looking at the development schedules of the operational trains at Sabine Pass provides some clues, if we assume that Cheniere continues its successful track record of bringing LNG capacity from commissioning to fully in-service in a timely manner. The graph in Figure 2 highlights the time from the start of commissioning to the in-service date for each of the five existing trains (shaded intervals), the timing of their first LNG export cargoes (green vertical lines) and the corresponding daily feedgas volumes at the Sabine Pass facility (blue area). [For a detailed explanation of the commissioning process and timeline, see our blog series, Steppin’ Out with My LNG.]
Cheniere originally took FID on the first two trains of Sabine Pass in July 2012, and on Trains 3 and 4 in 2013. Construction and commissioning on these trains were done within a relatively short timeframe, and that likely helped enable shorter commissioning period for each train. Cheniere has worked with the same EPC contractor, Bechtel, for building all of its liquefaction trains, both at Sabine Pass and Corpus Christi, and construction and commissioning have gotten more efficient as the companies continued to work together. Train 1 began taking feedgas in the fall of 2015 but encountered some mechanical problems that delayed the commissioning process. The time from first feedgas to substantial completion for Train 1 was about eight months (yellow interval). However, this was the only Cheniere train to have such issues, and all subsequent start-ups have gone quicker.
Train 2’s commissioning process (light-orange interval) took about five months, and Trains 3 and 4 (purple and green intervals, respectively) each took about four and a half months from first feedgas to completion. Train 5 followed a somewhat lengthier timeline. Cheniere took FID on Train 5 in 2015, so it was brought online a bit more independently from the first four liquefaction units. By the time Train 5 was ready to begin taking feedgas in September of 2018, Train 4 had already been online for nearly a year. Construction on Train 5 began in mid-2015 and commissioning took about six months (aqua interval), with initial feedgas intake starting in September 2018 — the longer timeframe may have been due to fewer synergies in commissioning a single train vs. completing multiple trains back-to-back. However, it also may have been because Cheniere was purposefully dragging its heels on completing a project that was ahead of schedule during a time when global prices were very low. Corpus Christi Train 3, which came online in a higher price environment, took about five months to complete, but that also includes dealing with Winter Storm Uri at the very end of its commissioning process.
The time between taking feedgas and first LNG production, which occurs during the commissioning phase, has been somewhat more variable. It appears both trains 2 and 4 had an advantage here, since they were constructed together and brought online in close conjunction with the previous train — i.e., trains 1 and 3, respectively. However, in general, that interval has also narrowed over time. Sabine Pass Train 5 and Corpus Christi Train 3 both took feedgas for around two months before exporting their first LNG cargoes, and that is likely a good approximator for how things will go for Train 6.
Cheniere began construction on Train 6 in late 2018, when Cheniere gave its engineering, procurement and construction partner, Bechtel, limited notice to proceed and well before it achieved FID in mid-2019. Both parties wanted an agreement in place and for construction to begin before work was completed on Train 5, which was commissioning at the time. At the time of FID, Train 6 was expected to be placed into service in 2023, but as with most of Cheniere’s other trains, construction is ahead of schedule. Last year, Cheniere officially accelerated the timeline and announced that the terminal’s final train would be ready in the second half of 2022. However, the latest guidance suggests it will likely be completed even earlier than that — in the first half of 2022. In its fourth-quarter 2020 earnings report in February, Cheniere said that the liquefaction unit was over 80% complete, and in early March at the CERAWeek conference, Cheniere’s CEO Jack Fusco indicated he was hopeful for first LNG production by the end of this year. Although there has been some speculation about whether that means Train 6 will come online by then, it could also just mean that it will be producing commissioning cargoes as part of the start-up process. Either way, this timeline would be well ahead of the previous construction and commissioning schedule, which had commissioning starting sometime in 2022 in order to bring the train online in the second half of the year.
To be able to produce first LNG by the end of the year, Sabine Pass Train 6 would likely have to start taking commissioning feedgas by this October, based on the time lag between feedgas intake and first LNG production seen during the build-out of the other liquefaction trains at both the Sabine Pass and Corpus Christi facilities. On the other hand, if Cheniere is truly eyeing full start-up of Train 6 by the end of this year, then feedgas flows to the unit will need to begin sometime in the early to middle part of this summer. Based on historical gas flows to the Sabine Pass terminal, each train requires about 800 MMcf/d of feedgas once fully operational, though first LNG can be — and usually is — produced at lower feedgas levels than that. So using the more conservative timeline of first LNG production by the end of the year would put initial feedgas deliveries starting in October and ramping up to that 800-MMcf/d level in March 2022, similar to the schedule we saw with Corpus Christi Train 3.
On the heels of Cheniere’s expansions is a brand-new export facility and the first of the true second wave of liquefaction projects: Venture Global’s Calcasieu Pass in Cameron Parish, LA, located down the road from Sabine Pass and Cameron LNG. Calcasieu Pass was the third second-wave project to take FID back in 2019, following Golden Pass (also in Louisiana as shown on the map above) and LNG Canada, in British Columbia. However, because of its mid-scale, modular technology, and aggressive construction timeline, Calcasieu Pass will be the first of these projects to come online — by at least a few years.
There is not a great existing template for how commissioning at Calcasieu Pass will go. The project is using a modular technology and a liquefaction process not yet tested in the U.S. (Kinder Morgan’s Elba Liquefaction terminal in Georgia also uses modular LNG system, but the technology and players involved are different enough that Elba’s start-up process doesn’t provide any meaningful insight into the timing of Calcasieu Pass.) The project consists of 18 mini-trains, or units, each with a nameplate capacity of 0.626 MMtpa, grouped by twos into nine “liquefaction blocks.” Although the nameplate capacity of the terminal is 11.27 MMtpa, actual operational capacity is expected to be around 10 MMtpa, with 8 MMtpa of that secured by long-term contracts. The contracts are held by a mix of European offtakers and global portfolio players, as shown in the table in Figure 3, which is excerpted from the full “Primary Capacity-Holders/FOB LNG Offtakers” table in the quarterly supplement of our LNG Voyager report.
Six of the 18 liquefaction units were installed as of early March, with reports that an additional two would be installed over the coming weeks. Commissioning at the terminal for those trains will likely begin soon. Venture Global issued a tender for LNG tankers to export commissioning cargoes between October 2021 and early 2022. This doesn’t mean that Calcasieu Pass will definitely be ready to export by October though — tenders are not binding, and industry insiders say December 2021 is a more likely target for first LNG export from the terminal. In order to export LNG in December, the terminal will likely need to begin taking feedgas in October, at the latest. In fact, it’s likely to be even earlier than that, since it’s a new facility and bringing a first train online, along with all the terminal’s ancillary equipment, typically takes longer than bringing subsequent trains at an existing terminal. Venture Global already has completed the terminal’s feedgas header system, the TransCameron Pipeline, and just last week (on April 7), the operator received FERC authorization to place it into service. (The pipeline has not reported any gas flowing yet, and likely won’t until the terminal receives authorization to take feedgas.) The terminal is still targeting 2022 for full commercial operations.
Calcasieu Pass will utilize on-site gas generation to power its liquefaction process, and this does tell us something about what the terminal’s feedgas requirements will be once operational. Other terminals that use on-site generation, such as the Cheniere plants, typically require feedgas to be greater than 110% of export capacity, meaning that in order to export 10 MMtpa, which is about 1.32 Bcf/d of LNG, Calcasieu Pass will need at least 1.45 Bcf/d of feedgas. That said, TransCameron has a nameplate capacity of 2.15 Bcf/d, and Venture Global has said that it has over 2 Bcf/d of firm pipeline transport capacity on the pipelines that connect to TransCameron.
While the exact timing of commissioning for Calcasieu Pass and Sabine Pass Train 6 may be unknown, their respective timelines suggest that some portion of the incremental 2.25 Bcf/d of feedgas demand from the two projects (~1.45 Bcf/d from Calcasieu Pass and ~0.8 Bcf/d from Sabine Pass Train 6) is likely to come online late this year. In other words, domestic feedgas demand from U.S. LNG export terminals could jump by close to 1 Bcf/d or more along the Gulf Coast in the fourth quarter of this year and bring total feedgas deliveries closer to the 12-Bcf/d level by year’s end. And as these two projects become fully operational in 2022, we’re likely to see total U.S. feedgas demand climb further to about 13.2 Bcf/d — up a whopping 20% from current levels, and again, with all of that increase coming in the Gulf Coast region. [That will, in turn, have a big impact on Gulf Coast gas flows and basis, which was the subject of our Some Beach report.]
We expect feedgas volumes to stabilize at that level, at least for a few years, until Golden Pass begins commissioning sometime in 2024, or unless new, fast-moving expansion projects take FID. However, FIDs for second-wave projects are still proving very hard to come by. Global prices may have long since recovered from the COVID lows, but appetite for new offtake capacity is still very much at a standstill. Only Sempra Energy’s ECA LNG, a small, single-train brownfield project in Mexico, was able to get enough traction to be greenlighted in 2020 (see Closer). Sempra reached a positive FID on the project in November of last year, becoming the first North American project to take FID since Calcasieu Pass did in August 2019. So without additional FIDs, the only remaining U.S. project under construction post-2022 is Golden Pass, which as we noted earlier, is not due to come online until 2024 — and that will have to be the subject of an upcoming blog.