LNG Supply & U.S. production

Maintenance schedule U.S. Pacific Basin Other Markets

U.S.: Supply growth led by new trains; Sabine Pass and Calcasieu Pass to offer most spot supply

BNEF estimates that U.S. LNG output could grow 14% over summer 2022 compared to last summer. However, the average plant utilization rate at the seven U.S. facilities will be 92% over summer 2022, slightly lower than last summer’s 103% utilization, due to additional capacity and maintenance events. Sabine Pass shows the highest spot cargo availability with total supply expected to be 4.5 million tons in excess of contractual obligations, followed by pre-commissioning cargoes from Calcasieu Pass.

Supply growth: Ramp-up of production at Sabine Pass Train 6 and Calcasieu Pass commissioning are expected to provide the majority of the growth. Sabine Pass output is forecast to average 2.6 million tons a month through the summer. Assuming the current pace of approvals, Calcasieu Pass will have 18 operational trains receiving feedgas by November 2022, according to BNEF estimates.

Risks: Light maintenance events are assumed for Cove Point, Corpus Christi and Freeport this summer between April-September. However, U.S. suppliers could be incentivized to minimize maintenance downtime with netbacks at an all-time-high due to the Russia-Ukraine war. Tropical storms between August-September in the Gulf Coast, typically lasting up to three days, can also pose a risk to U.S. LNG loadings.

U.S.: Gas production set for continued growth, reaching over 100Bcf/d by end of 2023

BNEF’s latest U.S. Gas Production Outlook expects Lower 48 gas production to rise to 101 billion cubic feet per day (Bcf/d) by the end of 2023 in a base-case scenario. Strong commodities prices and rising upstream activity add tailwinds for growth. Rig counts, well completions and frack spreads are likely to keep climbing after bottoming out in mid-2020.
Capital discipline remains the main focus for public oil and gas companies. Many public producers have reinstated their intentions to keep production flat despite rising prices. On the other hand, private producers have more leeway with their capital decisions.
High oil prices could be significant tailwind for Lower 48 gas supply, as nearly 40Bcf/d (42%) of production comes from associated gas, according to March 2022 figures. If oil prices remain elevated and drilling intensifies, gas production could be above BNEF’s bull case forecast of 106Bcf/d by the end of 2023.
On the downside, the Mountain Valley Pipeline saw a rejection of forest crossing permits, for which BNEF sees at least an eight-month delay from its September 2022 start-up date. This caps Appalachia basin gas production at about 35Bcf/d. The basin is the largest source of Lower 48 gas production, but pipeline takeaway constraints limit growth.