US E&Ps Make Case for Exposure to Global LNG Market

Copyright © 2023 Energy Intelligence Group  Published: Fri, Feb 3, 2023 Author Caroline Evans, Houston  Editor Mark Davidson

US gas producers, seeking greater exposure to international markets, have recently pushed into the LNG export sector. But their strategy is more about diversification than an overhaul of the E&P business model, executives said this week.

“We're not going to be big LNG players like Cheniere or Freeport or anything like that,” Devon Energy CEO Rick Muncrief said at the NAPE conference in Houston on Wednesday. “I mean, from our perspective, it's how can we get some exposure in international markets and help our allies around the world. We do the same thing with oil.”

Last year, Devon inked an initial agreement with floating LNG (FLNG) specialist Delfin Midstream to help develop an offshore liquefaction facility off Louisiana. The deal includes a pre-sanction investment by Devon and a heads of agreement to finalize a 1 million ton per year (0.142 billion cubic feet per day) tolling agreement for capacity in Delfin’s first FLNG project. Muncrief said Wednesday that the project would take about 10% of Devon’s gas production volumes.

US independents have been increasingly interested in exposure to the global LNG market after Russia’s invasion of Ukraine pushed commodity prices higher and made North American supply more attractive to foreign buyers. For instance, ConocoPhillips has partnered with Sempra to develop the Port Arthur LNG project in Louisiana, while Chesapeake Energy has inked a deal to supply the Golden Pass LNG project with “responsibly sourced” gas.

'Most of Our Investors Get It'

But Chesapeake CEO Nick Dell’Osso said the company’s LNG strategy was not about short-term gains. “Most of our investors get it and they think it's a good idea,” he said at the conference. “At the end of the day, the way I describe it to our investors, is this is not arbitrage capture. This is diversification of market. The US gas is being sold in international markets. We should have exposure to that. That's diversification of your product sales points and ultimately like any other portfolio diversification.”

Chesapeake has also committed 700 million cubic feet per day of its Haynesville Shale gas production to Momentum Midstream’s NG3 gathering system, which will ferry gas from Haynesville fields to third-party interconnections near Gillis, La. — including several pipelines that directly supply LNG export facilities along Louisiana's Gulf Coast.

The project will have an initial capacity of 1.7 Bcf/d, expandable to 2.2 Bcf/d, and includes carbon capture and sequestration that will remove and store underground 100% of the project's CO2 emissions.

US gas producers, seeking greater exposure to international markets, have recently pushed into the LNG export sector. But their strategy is more about diversification than an overhaul of the E&P business model, executives said this week.

“We're not going to be big LNG players like Cheniere or Freeport or anything like that,” Devon Energy CEO Rick Muncrief said at the NAPE conference in Houston on Wednesday. “I mean, from our perspective, it's how can we get some exposure in international markets and help our allies around the world. We do the same thing with oil.”

Last year, Devon inked an initial agreement with floating LNG (FLNG) specialist Delfin Midstream to help develop an offshore liquefaction facility off Louisiana. The deal includes a pre-sanction investment by Devon and a heads of agreement to finalize a 1 million ton per year (0.142 billion cubic feet per day) tolling agreement for capacity in Delfin’s first FLNG project. Muncrief said Wednesday that the project would take about 10% of Devon’s gas production volumes.

US independents have been increasingly interested in exposure to the global LNG market after Russia’s invasion of Ukraine pushed commodity prices higher and made North American supply more attractive to foreign buyers. For instance, ConocoPhillips has partnered with Sempra to develop the Port Arthur LNG project in Louisiana, while Chesapeake Energy has inked a deal to supply the Golden Pass LNG project with “responsibly sourced” gas.

'Most of Our Investors Get It'

But Chesapeake CEO Nick Dell’Osso said the company’s LNG strategy was not about short-term gains. “Most of our investors get it and they think it's a good idea,” he said at the conference. “At the end of the day, the way I describe it to our investors, is this is not arbitrage capture. This is diversification of market. The US gas is being sold in international markets. We should have exposure to that. That's diversification of your product sales points and ultimately like any other portfolio diversification.”

Chesapeake has also committed 700 million cubic feet per day of its Haynesville Shale gas production to Momentum Midstream’s NG3 gathering system, which will ferry gas from Haynesville fields to third-party interconnections near Gillis, La. — including several pipelines that directly supply LNG export facilities along Louisiana's Gulf Coast.

The project will have an initial capacity of 1.7 Bcf/d, expandable to 2.2 Bcf/d, and includes carbon capture and sequestration that will remove and store underground 100% of the project's CO2 emissions.