US' Constellation LNG wants imports approval until 2030

: Natural gas
24/09/13

US firm Constellation LNG, which operates the 5.1mn t/yr Everett import terminal near Boston, has applied to the Department of Energy (DOE) for authorisation to import LNG until June 2030.

Constellation is seeking permission to import up to 50bn ft³ of LNG — equivalent to around 1.1mn t — from 1 December 2024-1 June 2030 from Trinidad and Tobago and other sources.

The Massachusetts utilities regulator in May approved three downstream supply agreements between Everett and local gas distributors National Grid, Eversource and Unitil. The contracts appear to have provided Constellation with enough new business to keep the terminal operating after the closure of 1,413MW Mystic gas-fired power plant, previously Everett's biggest customer.

Mystic closed in May following the expiry of a ratepayer subsidy from the New England grid operator, which allowed the power plant to remain economically viable even though global LNG prices have held above US regional pipeline gas prices in recent years.

Scarce pipeline capacity in New England forces the region to rely on imported LNG to alleviate gas price spikes when demand is high, particularly in winter.

The LNG imported to Everett is to be sourced through a long-term supply and purchase agreement agreed in October 2022, Constellation said in its filing to the DOE. The 1.1mn t of LNG requested by the firm equates to around 220,000 t/yr of imports, assuming consistent quantities across the five-year period. This is a step down from recent years, for instance 2023 when the terminal imported 339,000t, and is likely a reflection of the requirements of the three new supply deals, compared with that of the Mystic power plant.

Everett last imported a cargo in March, according to shiptracking data from analytics firm Kpler. The terminal has received most of its supply from Trinidad and Tobago's 11.8mn t/yr Atlantic LNG terminal in recent years, although has also imported from Nigeria and Norway.

By Cerys Edwards

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24/12/30

Viewpoint: Permian waiting on new gas lines

Houston, 30 December (Argus) — Natural gas prices in the Permian basin of west Texas and southeast New Mexico fell to historic lows in 2024, with increased takeaway out of the region likely not picking up before 2026. Gas in the Permian basin is fundamentally tied to crude economics, with associated gas being a byproduct of crude-directed drilling. US benchmark WTI values continued to boost crude output in 2024, with month-ahead Nymex WTI futures for delivery in 2024 averaging $76.20/bl, down from $78/bl in 2023, but still much higher than in previous years since 2014. As of the week ended 20 December, the Permian basin rig count stood at 304 rigs, down by only five rigs from the same time a year prior , according to oilfield service provider Baker Hughes. The vast majority of those rigs were crude-directed. Strong associated gas output has frequently pushed spot prices at the Waha hub in west Texas into negative territory since 2019. Waha prices held positive through 2021, helped in part by increased takeaway capacity, before turning negative in four trading sessions in 2022 and seven sessions in 2023. Negative Waha prices were a much more regular feature in 2024, with sellers needing to pay buyers to take Permian gas for about 47pc of the trading sessions throughout January-November. The Waha index fell to -$7.085/mmBtu on 29 August, a historic low. But prices averaged above $2/mmBtu from the middle of November into the first half of December , buoyed by seasonally stronger demand and the end of planned and unplanned maintenance on several Permian pipelines. Spot prices at the Waha hub returned below $1/mmBtu in the final full week of December, as unseasonably mild weather crimped demand. The January-March block for Waha was $2.235/mmBtu as of 27 December, according to Argus forward curves. Spot prices often have been negative despite growing export demand from the LNG sector and for pipeline flows to Mexico. Even excluding potential flows through the most recently commissioned 1.7 Bcf/d (17.6bn m³/yr) ADCC pipeline in south Texas, aggregate feedgas flows to US liquefaction facilities edged higher to 12.9 Bcf/d in January-November from 12.75 Bcf/d a year earlier. Pipeline exports to Mexico rose to 6.06 Bcf/d in January-September from 5.7 Bcf/d a year earlier, US Energy Information Administration (EIA) data show. Pipelines out of the Permian have typically taken little time to reach capacity, as was the case when US firm Kinder Morgan's Gulf Coast Express and Permian Highway pipelines opened in 2019 and 2020, respectively, and more recently in 2021 with the Whistler pipeline. Similarly, flows on the 2.5 Bcf/d Matterhorn Express Pipeline quickly ramped up in October after the line began taking on gas in September. Takeaway capacity out of the Permian is not planned to rise much further before 2026. Several large new pipelines remain under construction or in the planning stage, including the 2 Bcf/d Apex and 2.5 Bcf/d Blackcomb pipelines, both due to enter service in 2026. Oneok's 2.8 Bcf/d Saguaro Connector pipeline is not expected before 2027. Targa's proposed Apex Pipeline, which would link the Permian to the Port Arthur LNG project, remains under consideration. Oversupply led to output cuts in more gas-directed fields in the US in 2024, but Permian gas production has been immune to the low price environment. Low or negative prices at Waha may eventually spur output cuts in the oil-oriented Permian, but that would require WTI prices falling closer to breakeven. Permian producers need WTI to be at a minimum of $62/bl to profitably drill a new well, while the breakeven price for an existing well was $38/bl, according to an April survey by consumer data platform Statista. Producers such as Chevron do plan to curb spending in the region by as much as 10pc in 2025. Chief executive Mike Wirth noted in the company's third quarter 2024 earnings call that Permian "growth will become less the driver and free cash flow will become more of the driver". Yet Permian gas, which accounts for roughly a fifth of US output, is still set to rise to 26.1 Bcf/d in 2025 from a projected 24.8 Bcf/d in 2024, according to the US EIA's December Short-Term Energy Outlook . By David Haydon Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Mild weather may pressure gas prices in 2025

24/12/27

Viewpoint: Mild weather may pressure gas prices in 2025

Houston, 27 December (Argus) — The US natural gas market has worked to lower inventories and bring prices up this year, but a warm 2024-25 winter may once again keep storage levels elevated in the new year. US natural gas inventories at the end of the 2023-24 winter season were well above average due to minimal heating demand caused by mild winter weather and robust US production. Storage levels ended the season on 29 March at 2.259 Tcf (64bn m³) — 39pc higher than the five-year average and 23pc higher than a year earlier. The higher inventories pushed down gas prices by minimizing concerns about supply shortfalls and disincentivized production this year, as large natural gas producers such as Chesapeake Energy and EQT reduced output on low prices and minimal expected demand. These interventions helped reduce the supply glut. Total US gas inventories for the week ending 1 November were 3.932 Tcf, entering the 2024-25 winter season only 6pc higher than the five-year average and 4pc higher than a year earlier. In addition, the US Energy Information Administration (EIA) predicted in its November Short Term Energy Outlook (STEO) that production in 2025 would be up 1pc from 2024 as lower inventories push up prices and once again incentivize production. EIA estimates that demand this winter will exceed last year's levels and keep inventories only just above average. According to December's STEO, inventories are expected to be 1.92 Tcf at the end of March 2025, only 2pc higher than the five-year average . However, the mild weather that has covered much of the country this November and December risks once again sharply cutting into heating demand, leaving inventories at the start of 2025's spring injection season high enough to again put downward pressure on gas prices. Heating demand in November was 12pc below the seasonal average, according to the National Weather Service (NWS). The mild weather caused prices at the Henry Hub, the US benchmark, to average roughly $2/mmBtu in November. However, EIA's December STEO predicted that prices at the Henry Hub would average just under $3/mmBtu for the rest of the winter heating season on expectations for cold weather. That cold weather has yet to fully materialize. While demand in the first week of December was 20pc higher than average on cold snap, temperatures since then have been above seasonal norms, with heating demand in the week ending 20 December landing at 22pc below average and demand in the week ending 28 December expected to be 26pc below average. If below-average demand continues into 2025, it is unlikely that inventories will drop as much as forecast. Prices this winter would be close to $3/mmBtu if withdrawals this season are close to 2.1 Tcf , East Daley Analytics senior director Jack Weixel said in September. US inventories had that level of withdrawal in winter from 2020-22. However, if temperatures this winter are once again well above average, Weixel said inventories could end the season more than 530 Bcf above average, cutting average prices to $2.50/mmBtu and undoing price from the smaller-than-average injection season. Prices may be especially pressured by rising production in the Permian basin of west Texas and southeastern New Mexico. Since most of the gas output from the Permian comes from oil wells, low gas prices may not affect production, as drilling decisions there are influenced by oil production rather than gas production. Prices may still rally this winter if temperatures dip low enough in January and February, offsetting the mild weather of November and December. In addition, the rise of LNG exports next year may boost demand and subsequently raise prices. Several LNG projects or expansions are currently underway in the US with the Golden Pass export terminal, the Plaquemines export terminal and the stage 3 expansion at Cheniere's Corpus Christi liquefaction terminal all expected to start up in 2025. By Anna Muthalaly Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US gas market poised for more volatility

24/12/26

Viewpoint: US gas market poised for more volatility

New York, 26 December (Argus) — US natural gas markets may be subjected to more dramatic price swings in 2025 as growing LNG exports and increasingly price-sensitive producers place greater pressure on the US' stagnant gas storage capacity. Those price swings could pose challenges for consumers without ample access to gas supplies, as well as producers interested in keeping some output unhedged to capture potentially higher prices without taking on excessive financial risk. But volatility may also present opportunities for traders looking to exploit unstable price spreads, and for producers that can adapt their operations to fit a more unpredictable pricing environment. Calm before the storm High storage levels and low spot prices this year — averaging $2.11/mmBtu through November this year at the US benchmark Henry Hub — triggered by an unusually warm 2023-24 winter, may have obscured some of the structural factors pushing the US gas market into a more volatile future. But those structural factors remain and loom increasingly large for prices. The US has moved from a roughly 60 Bcf/d (1.7bn m³/d) market eight years ago to a more than 100 Bcf/d market today, "and we haven't grown our storage capacity at all", Rich Brockmeyer, head of North American gas and power at commodity trading house Gunvor, said earlier this year. As supply and demand for US gas grow, the country's roughly 4.7-Tcf storage capacity becomes ever less effective in stemming demand shocks, such as extreme winter weather events, which can more rapidly draw down inventories than in years past. Additionally, a growing share of US gas is being consumed by LNG export terminals being built and expanded on the US Gulf coast. When those facilities encounter unexpected problems and cease operations — as has happened numerous times at the 2 Bcf/d Freeport LNG terminal in Texas in recent years — volumes that were previously being liquefied and sent overseas were instead backed up into the domestic market, crushing prices. More LNG exports may mean more opportunities for such supply shocks. US LNG exports are expected to increase by 15pc to almost 14 Bcf/d in 2025 as operations begin at Venture Global's planned 27.2mn t/yr Plaquemines facility in Louisiana and Cheniere's 11.5mn t/yr Corpus Christi, Texas, stage 3 expansion, US Energy Information Administration data show. Spot price volatility will be most acutely felt in regions like New England that lack underground gas storage. "In areas like the Gulf coast, where you have a lot of storage, it won't be a problem," Alan Armstrong, chief executive of Williams, the largest US gas pipeline company, told Argus in an interview. Producers' trade-off Volatile gas markets are a mixed bag for producers, many of whom profit from volatility while also struggling to plan and budget based on uncertain revenues for unhedged volumes. Though insufficient gas storage deprives the market of stability, "from the standpoint of a marketing and trading guy that's trying to manage my gas supply to customers and my trading book, I love volatility",said Dennis Price, vice president of marketing and trading at Expand Energy, the largest US gas producer by volume. BP chief financial officer Sinead Gorman in November 2023 specifically named Freeport LNG's eight-month-long shutdown in 2022-23 from a fire as a driver of volatility in the global gas market. The supermajor was able to exploit the "incredibly fragile" gas market, she said, which was a key factor driving the success of its integrated gas business. "Those opportunities are what we typically seek and enjoy," Gorman said. Increasingly, producers have also been adapting to a more volatile market by switching production on and off in response to prices, but often without revealing the price at which a supply response will occur. Expand Energy, for instance, told investors in October that it was amassing drilled but uncompleted wells and wells that had yet to be brought on line, which it could activate relatively quickly when prices rise. It declined to name the price at which that would occur. Market participants, attempting to price in this phenomenon by anticipating producers' next moves may respond more dramatically to supply signals than in the past, when production was steadier. Producers' increased responsiveness to prices could help to balance the market somewhat, though more aggressive intervention into operations could take a toll on well performance and pipelines, FactSet senior energy analyst Connor McLean said. Producers are "treating the reservoir itself like a storage facility", Price said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: California dairy fight spills into 2025

24/12/24

Viewpoint: California dairy fight spills into 2025

Houston, 24 December (Argus) — California must begin crafting dairy methane limits next year as pressure grows for regulators to change course. The California Air Resources Board (CARB) has committed to begin crafting regulations that could mandate the reduction of dairy methane as it locked in incentives for harvesting gas to fuel vehicles in the state. The combination has frustrated environmental groups and other opponents of a methane capture strategy they accuse of collateral damage. Now, tough new targets pitched to help balance the program's incentives could become the fall-out in a new lawsuit. State regulators have repeatedly said that the Low Carbon Fuel Standard (LCFS) is ill-suited to consider mostly off-road emissions from a sector that could pack up and move to another state to escape regulation. California's LCFS requires yearly reductions of transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the state of approved, lower-carbon alternatives. Regulators extended participation in the program to dairy methane in 2017. Dairies may register to use manure digesters to capture methane that suppliers may process into pipeline-quality natural gas. This gas may then be attributed to compressed natural gas vehicles in California, so long as participants can show a path for approved supplies between the dairy and the customer. California only issues credits for methane cuts beyond other existing requirements. Regulators began mandating methane reductions from landfills more than a decade ago and in 2016 set similar requirements for wastewater treatment plants. But while lawmakers set a goal for in-state dairies to reduce methane emissions by 40pc from 2030 levels, regulators could not even consider rulemakings mandating such reductions until 2024. CARB made no move to directly regulate those emissions at their first opportunity, as staff grappled with amendments to the agency's LCFS and cap-and-trade programs. That has meant that dairies continue to receive credit for all of the methane they capture, generating deep, carbon-reducing scores under the LCFS and outsized credit production relative to the fuel they replace. Dairy methane harvesting generated 16pc of all new credits generated in 2023, compared with biodiesel's 6pc. Dairy methane replaced just 38pc of the diesel equivalent gallons that biodiesel did over the same period. The incentive has exasperated environmental and community groups, who see LCFS credits as encouraging larger operations with more consequences for local air and water quality. Dairies warn that costly methane capture systems could not be affordable otherwise. Adding to the expense of operating in California would cause more operations to leave the state. California dairies make up about two thirds of suppliers registered under the program. Dairy supporters successfully delayed proposed legislative requirements in 2023. CARB staff in May 2024 declined a petition seeking a faster approach to dairy regulation . Staff committed to take up a rulemaking considering the best way to address dairy methane reduction in 2025. Before that, final revisions to the LCFS approved in November included guarantees for dairy methane crediting. Projects that break ground by the end of this decade would remain eligible for up to 30 years of LCFS credit generation, compared with just 10 years for projects after 2029. Limits on the scope of book-and-claim participation for out-of-state projects would wait until well into the next decade. Staff said it was necessary to ensure continued investment in methane reduction. The inclusion immediately frustrated critics of the renewable natural gas policy, including board member Diane Tarkvarian, who sought to have the changes struck and was one of two votes ultimately against the LCFS revisions. Environmental groups have now sued , invoking violations that effectively froze the LCFS for years of court review. Regulators and lawmakers working to transition the state to cleaner air and lower-emissions vehicles will have to tread carefully in 2025. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US LPG cargo premiums poised to fall

24/12/23

Viewpoint: US LPG cargo premiums poised to fall

Houston, 23 December (Argus) — The booming US LPG export market has fueled record spot fees this year for terminal operators that send those cargoes abroad, but those fees are poised to fall next year as additional export capacity comes online. US propane exports surged over the past two years, hitting an all-time high of 1.85mn b/d in the first quarter of this year, according to data from the US Energy Information Administration (EIA). Terminal fees for spot propane cargoes out of the US Gulf coast hit an all-time high of Mont Belvieu +32.5¢/USG (+$169.325/t) in mid-September. US propane production is expected to grow by another 80,000 b/d in 2025 to 2.22mn b/d while the outlook for domestic consumption is fairly steady, at 820,000 b/d next year — meaning even more propane will be pushed into the waterborne market. But that is dependent on US infrastructure keeping up with the pace of production. US export terminals in Houston, Nederland and Freeport, Texas, have run at or above capacity for the last two years given the thirst for cheaper US feedstock, largely from propane dehydrogenation (PDH) plant operators in China. This demand has created bottlenecks at US docks, and midstream operators like Enterprise, Energy Transfer, and Targa have rushed to ramp up spending on both pipelines and additional refrigeration to stay ahead of the wave of additional production. US gas output spurs LPG exports As upstream producers have ramped up natural gas production ahead of new LNG projects, most producers are counting on LPG demand from international outlets in Asia to offload the ethane and propane the US cannot consume. For the past four years, Asian buyers have been more than happy to oblige. US propane exports to China rose from zero in 2019, when China imposed tariffs on US imports, to an average of 1.36mn metric tonnes (t) per month in January-November 2024, according to data from analytics firm Kpler, making China the largest offtaker of US shipments. US exports to Japan averaged 480,000t per month throughout most of 2024, and exports to Korea averaged 460,000t per month in the first 11 months of 2024. China, Korea, and Japan received 52pc of US propane exports in 2024, up from 49pc in 2020, according to data from Vortexa. Strong demand in Asia has kept delivered prices in Japan high enough to sustain an open arbitrage between the US and the Argus Far East Index (AFEI). Forward-month in-well propane prices at Mont Belvieu, Texas, have remained well below delivered propane on the AFEI. In 2020, Mont Belvieu Enterprise (EPC) propane averaged a $143/t discount to delivered AFEI — a spread that has only widened as additional PDH units in Asia have come online. During the first 11 months of 2024, the Mont Belvieu to AFEI spread averaged a hefty $219/t, leaving plenty of room for wider netbacks in the form of higher terminal fees for US sellers, especially as a wave of new VLGCs entering the global market has left shipowners with less leverage to take advantage of the wider arbitrage. The resulting wider arbitrage to Asia has kept US export terminals running full for the last two years. So when a series of weather-related events and maintenance in May-September limited the number of spot cargoes operators could sell and delayed scheduled shipments, term buyers willing to resell any of their loadings could effectively name their price. This spurred the record-high premiums for spot propane cargoes in September. New projects may narrow premium An increase in US midstream firm investments in additional dock capacity and added refrigeration in the years ahead could narrow those terminal fees, however. Announced projects from Enterprise and Energy Transfer, in particular, will add a combined 550,000 b/d of LPG export capacity out of Houston and Nederland, Texas by the end of 2026. Enterprise's new Neches River terminal project near Beaumont, Texas, will add another 360,000 b/d of either ethane or propane export capacity in the same timeframe. These additions are poised to limit premiums for spot cargoes by the end of 2025. Already, it appears the spike in spot cargo premiums to Mont Belvieu has abated for the rest of 2024. Spot terminal fees for propane sank to Mont Belvieu +14¢/USG by the end of November. The lower premiums come not only as terminals resume a more normal loading schedule, but at the same time a surplus of tons into Asia ahead of winter heating demand has narrowed the arbitrage. The spread between in-well EPC propane at Mont Belvieu fell from $214.66/t to $194.45/t during November. A backwardated market for AFEI paper into the second quarter of 2025 means US prices are poised to fall more in order to keep the spread from narrowing further. By Amy Strahan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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