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Asia, Europe prices to boost US LNG exports over winter: EIA

Strong demand for power plant and home heating fuel, along with high spot prices in Asia and Europe, are expected to boost US LNG export volumes and utilization of liquefaction units this winter, the Energy Information Administration said Thursday.

However, overall utilization of existing LNG liquefaction facilities in 2018 will be slightly lower, on average, than in 2017, EIA said in a report.

The outlook comes as a second US exporter of LNG produced from shale gas, Dominion Energy, prepares to begin production in Maryland, joining Cheniere Energy, which shipped its first cargo from its Sabine Pass terminal in Louisiana in February 2016.

None of the second wave of projects that are being proposed for US shores took a final investment decision this year amid fears of a global supply glut.

Next year is expected to be a consequential one for the dozen or so developers, as several are hoping to prove viability and advance toward construction. In the meantime, the handful of LNG projects currently being built in the US will strengthen the US’ position in the market.

“With increasing liquefaction capacity and utilization, US LNG exports averaged 1.9 Bcf/d, and capacity utilization averaged 80% this year, based on data through November,” EIA said. “Exports from Sabine Pass began to increase in September 2017 as Train 4 ramped up to full production — reaching 2.7 Bcf/d in November — with an overall capacity utilization rate of 96% across four trains.”

Over the last two months, feedgas volumes at Sabine Pass have remained highly utilized at 98%, likely driven by increasingly favorable netbacks, data compiled by Platts Analytics’ Bentek Energy show. Netbacks to the UK’s National Balancing Point trading hub and in JKM, the benchmark price for spot LNG in Northeast Asia, have continued to rise, increasing $1.01/MMBtu to $3.19/MMBtu and 85 cents/MMBtu to $4.15/MMBtu, respectively, over the last two months.

Netback forwards suggest a similar trend is expected over the next year, helping to drive high utilization in the forecast for LNG feedgas. Platts Analytics forecasts feedgas deliveries in the US will average 3.8 Bcf/d over 2018. High utilization of US facilities is expected to continue through 2022, as new capacity is added to the market, with feedgas growing to reach 10.5 Bcf/d by 2021, Platts Analytics data shows.

EIA said utilization at Sabine Pass is projected to remain well above 90% in winter 2017-2018 based on the short-term outlook for demand and overseas prices. Overall utilization of existing LNG liquefaction facilities next year is expected to average 79%, down slightly from the 2017 average, the agency said.

Weather, demand fluctuations, seasonality in import markets and production schedules for new LNG facilities are among the factors that can affect utilization rates, EIA said.

Earlier this week, Dominion began introducing feedgas at Cove Point so that it can begin production. Shell has agreed to take Cove Point’s commissioning cargoes, while Gail India and ST Cove Point, which is a joint venture of Japan’s Sumitomo and Tokyo Gas, hold long-term contracts to buy Cove Point’s capacity.

–Harry Weber, harry.weber@spglobal.com

–Liz McFarland, lmcfarland@spglobal.com

–Edited by Richard Rubin, richard.rubin@spglobal.com

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