USA NatGas Risks Busting at the Seams

U.S. natural gas production risks busting at the seams with infrastructure constraints already impacting Northeast production and Permian constraints expected to appear in 2023.

That’s what a BofA Global Research report sent to Rigzone on Tuesday stated, adding that, entering 2023, it may be necessary to throttle back production growth in order to avoid an oversupply.

“Increased LNG exports has been one of the largest drivers of demand growth over the last several years,” the report stated.

“However, no new facilities will come online in 2023, the first year without an increase in capacity since exports started in 2016,” the report added.

The BofA Global Research report forecasts that U.S. L48 production will grow four billion cubic feet per day year on year in 2022 and three billion cubic feet per day year on year in 2023, “driven by gains in the Permian and Haynesville”.

“All said, we expect output to reach 99 billion cubic feet per day by the end of the year, up three billion cubic feet per day from December 2021 levels,” the report stated.

Project FIDS

The tight global gas market should help encourage additional U.S. liquefaction projects to receive a Final Investment Decision (FID), according to the BofA Global Research report. However, the timeline to construction of any new facility is at least two years, the report noted.

“Thus, any significant increase in U.S. export capacity, beyond what is currently under way, would most likely be 2025+,” the report stated.

“That said, there are currently 13 U.S. liquefaction projects … that have received DOE and FERC approval, but have not made a FID. We expect the current global gas environment to push several of these projects over the finish line,” the report added.

US LNG Cargoes

According to the U.S. Energy Information Administration’s (EIA) latest Short Term Energy Outlook, U.S. liquefied natural gas exports averaged 10.9 billion cubic feet per day in February, down from 11.2 billion cubic feet per day in January.

“Similar to last year, U.S. LNG exports in February were limited by fog in the Gulf of Mexico that affected vessel traffic,” the EIA STEO noted.

In the STEO, the EIA said it expects high levels of U.S. LNG exports to continue in 2022, averaging 11.3 billion cubic feet per day for the year. The EIA highlighted in the STEO that this is a 16 percent increase from 2021.

Many U.S. LNG cargoes were delivered to Europe last month, the STEO revealed. It noted that inventories in the area are lower than the five-year average and stated that potential supply disruptions related to the conflict in Ukraine are a concern.

“Although Europe’s inventories are low, the additional LNG imports, as well as a mild winter, are helping bring inventories closer to the five-year average than they were at the beginning of the winter,” the STEO stated.

To contact the author, email andreas.exarheas@rigzone.com