U.S. natural gas markets are going to see big swings for at least a year and a half, with production volumes coming out this year at about the same rate as at the start of the year, according to an IHS expert Markit.
Jack Weixel of IHS Markit, Senior Practice Director Gas, Power and Energy Futures, presented his perspective on global market fluctuations, as well as the prospects for pipeline infrastructure growth in the United States, at the recent LDC Natural Gas Forums conference in New Orleans. .
âI think the volatility is here to stay for at least 18 months,â he told the audience. National gas production this year has been “stagnant … We will essentially exit 2021 at the same volumes as we entered there … It takes some time for producers to ramp up”, and activity has remained sluggish.
âYou really need a stable supply – and a growing supply – to meet this growing demand,â Weixel said. âThis is one of the peculiarities of this market. “
Price volatility going forward “maybe not all weatherization issues” like the shocking winter storm Uri last February “because I think this is being resolved in a lot of places. But certainly, where there are fuel shortages, you will see price spikes. “
Where is LNG growth expected in the United States?
Expansions of less than 48 liquefied natural gas (LNG) facilities are expected to continue on the Gulf Coast to help supply thirsty overseas markets. IHS Markit, reflecting other analysts’ forecasts, predicts that the Calcasieu Pass LNG facility in Louisiana will be online by the end of the year. The TransCameron pipeline that feeds the project was cleared by federal regulators earlier this year to come into service.
âIn fact, we are already seeing flows towards the Col de Calcasieu,â Weixel said. “We can certainly see the rationale for further development of these Gulf Coast facilities as global demand increasesâ¦ at least until the end of 2024.”
A massive amount of gas has yet to be unearthed in the Lower 48. However, moving it to end users is no longer a sure thing.
âIt’s getting harder and harder to build pipelines in this country in general,â Weixel said. âThere is a new kind of political realityâ¦ Things are changing. Meanwhile, proposed or ongoing pipeline projects in Lower 48 are dwindling.
âIn 2017, we saw a peak of 24.2 billion cubic feet / d of new pipeline and 2,100 miles of pipeline,â he said of the Lower 48. âBut since then we haven’t have yet to reach that peak in terms of capacity additions or pipeline miles. “
Projects led by exploration and production (E&P) companies have dried up, along with reduced capital spending and new developments.
âIt wasn’t going to come out as much of the earth, so they didn’t invest as much transportation to get it to different places,â Weixel said of the E&P. âBut I think we also have to recognize that there is a more sophisticated activist engagementâ on the part of investors keen to implement environmental, social and governance initiatives.
âYou also need to recognize the cultural shift towards a ‘green’ movementâ¦ These things areâ¦ important, and I think they will become more important as we move forward. “
To date this year, pipeline expansions in the United States have consistently exceeded 2020 levels and “are approaching 2019 levels.” By the end of the year, approximately 11 Bcf of net pipeline expansion is expected, along with 1,500 new miles of pipeline.
Growth in Texas and Louisiana
The growth, however, is not nationwide.
âCapacity additions in Texas and Louisiana accounted for 88% of all Lower 48 pipeline expansions and additions in 2020,â Weixel said. âIn terms of line miles, 97%â¦ that was built in the United States is in Texas or Louisiana, and most of it was in Texas. “
The Permian Basin has been the ground zero for much of the pipeline growth in Texas and Louisiana, where âthere’s an attractive political climateâ¦ There are regulators thatâ¦ don’t interfere. You get less friction from the state government in generalâ¦ â
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At the same time, a âcancellation cultureâ exists for expansions and new pipes, mainly in the northeast, which is home to the Appalachian Gas Basin.
âSince 2018, 30.4 billion cubic feet per day of expansion or new pipes have been canceled or suspended,â Weixel said. âA lot of it has been in the northeast. PennEast Pipeline was the most recent victim.
The Appalachian Gas Corridor has also seen the flow of the Constitution Pipeline, the Atlantic Coast Pipeline and the Access Northeast Pipeline.
âMany more have faced strong opposition from activists and the state government,â Weixel said. Going forward, âyou are faced with a wave of regulatory requirements and also litigation to basically start innovating. It’s a sobering image over thereâ¦ â
As for the northeast, “we currently anticipate that the Mountain Valley pipeline may not be fully built until 2024,” Weixel said. “With the obstacles the pipeline has already encountered and the anticipated obstacles along the way, the commissioning date of 2022 may not be as realistic as it was originally thought …”
Without a new outlet for the Marcellus and Utica shale gas, âthat pushes production up to a fairly high ceiling there, especially as we enter 2024â¦ It is difficult to build a large long pipeline. – courier in the northeast for all the reasons we’ve seen through all the headlines. I can anticipate this kind of sad but continuing reality that many of our friends in the pipeline industry are going to face. “
By region, nearly 40% of pipeline cancellations took place in the Northeast. South Central, which includes Texas and Louisiana, also saw nearly 32% of proposals stay on the drawing board. Many South Central expansions have been put on hold due to market forces over state intervention, Weixel said.
Booming on the Gulf Coast
Even with some projects on hold, construction is in full swing to move gas from the Permian to Gulf Coast markets. Weixel said the increase in line mile capacity “was primarily due to two factors, increased border crossing capacity to Mexico and liquefaction, which is very prevalent in Texas.”
The Permian, “at least for the next three years, has enough pipelines to carry gas, mostly from west to east” through Texas. âThis includes this year’s Permian Highway and Whistler additions,â as associated gas production from oil wells rebounds.
“If we go back to theâ¦ pre-Covid levels there, that associated gas can effectively be transported until the end of 2023. fine.”
The Haynesville shale gas also has âroom to growâ. The region could expand “faster” as many E&P working on the coin are sponsored by private equity firms, which do not have the “balance sheet restrictions” of public producers.
âWe think Haynesville is a very healthy area with what we call a higher market-based production cap,â Weixel said. IHS Markit’s assumptions show that growth is “good and healthy” and “goes back above 15-16 Bcf / d for the combined region there”.