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LNG Closure Creates Reliability Risk in New England

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With bitter temperatures blanketing the US, the Everett LNG import terminal is helping New England residents stay warm and keep the lights on this week. It could be the last winter for the 52-year-old facility.

While LNG exports boom on the Gulf Coast, New England risks losing a key source of peaking supply if owner Constellation Energy (CEG) moves ahead with a plan to retire the terminal in mid-2024.

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Operating since 1971, the Everett terminal is losing its primary customer, the nearby Mystic power plant in Boston, MA. The Mystic plant is set to retire in May 2024 as part of a Massachusetts state plan to transition off fossil fuels. Constellation is seeking new customers to take capacity at Everett, but the company could close the terminal later this year if those efforts don’t bear fruit.

East Daley Analytics covers LNG exports and imports in the US Macro Supply and Demand Forecast. We expect a shutdown at Everett to drive more volatility in regional natural gas prices, especially during periods of high demand like New England is experiencing this week. The terminal plays a critical role meeting regional spikes in heating load in frigid weather, as well as supplying power plants during critical weather events.

More recently, Everett has seen imports and utilization drop with the rise in global LNG prices. Lower LNG imports at Everett have translated to more volatility in citygate prices in Massachusetts (see figure). In 2022, peak monthly prices nearly doubled from peak levels prior to 2021, according to Energy Information Administration data (see figure). Spot gas prices topped $17/MMBtu this week at the Algonquin city gate.

Despite increased competition for LNG, Everett remains active and has received two LNG cargoes in recent weeks. Without the optionality for importing volumes, the region will need to rely more heavily on fuel oil for power and heating. – Alex Gafford Tickers: CEG.




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