Natural Gas Weekly: July 24, 2024
Infrastructure – A bankruptcy court on Wednesday (July 24) approved a settlement agreement between Zachry Holdings and Golden Pass LNG that will allow ExxonMobil (XOM) and Qatar Energy to hire a new lead contractor for the project.
The approval follows an emergency motion filed by Zachry on July 19 asking the bankruptcy court to approve the settlement with Golden Pass LNG and Chiyoda. The settlement allows Chiyoda to take over as the lead engineering, procurement and construction (EPC) contractor. Under the court order, Zachry relinquishes control as the lead manager of construction.
Zachry filed for Chapter 11 protection in May ’24 seeking a “structured exit†from Golden Pass LNG. The filing confirmed labor issues at Golden Pass that put a 1H25 start-up target at risk. Along with Zachry, Golden Pass has contracts with McDermott affiliate CB&I and Chiyoda for EPC services.
The settlement with Zachry is a positive development to jumpstart progress at Golden Pass LNG. Nevertheless, East Daley has pushed back the expected start date of the Texas LNG facility after the two-month bankruptcy proceeding halted momentum. In the latest monthly Macro Supply & Demand Forecast, we now expect Golden Pass Train 1 to begin service in January 2026.
As of the work stoppage, Train 1 at Golden Pass LNG was 83% complete, according to a progress report filed with the Federal Energy Regulatory Commission (FERC). Train 2 and Train 3 were 46% and 31% complete, respectively. As part of the original EPC joint venture, Chiyoda was only responsible for the commissioning phase of Train 1. Under the settlement, the company will need to expand its scope of work and rehire thousands of laid-off workers, which we expect will take time.
Despite the expected delay at Golden Pass, the demand outlook remains strong for LNG in 2025. The figure shows EDA’s LNG project stack in Energy Data Studio. Several other LNG projects plan to start in the next year, including Cheniere Energy’s (LNG) Corpus Christi Phase III project and Venture Global’s Plaquemines LNG.
Flows – Flows to Gulf Coast LNG facilities have been volatile recently owing to weather disruptions and infrastructure outages.
Freeport LNG has restored service at two liquefaction trains after Hurricane Beryl knocked out power to the facility on July 7. Freeport is one of the only Gulf Coast facilities lacking onsite power generation, and therefore is particularly susceptible to storm-induced outages. Last week, Freeport released a statement saying the facility would be operating at reduced capacity for an unspecified duration.
Corpus Christi LNG saw reduced flows last week, averaging just 1.6 Bcf/d of feedgas, in what looks like a maintenance event at the facility. Flows to Corpus Christi had returned to the usual 2.3 Bcf/d by Tuesday.
With the newly minted ADCC Pipeline in service, tracking flows into Corpus Christi LNG becomes more difficult; as much as 1.7 Bcf/d could flow to the facility via the intrastate pipeline. The ADCC pipeline will primarily supply the Corpus Christi Stage 3 expansion, slated to come online early next year.
Flows to Calcasieu Pass LNG were cut over the weekend due to an outage on ANR Pipeline. ANR declared a brief force majeure at the Mermentau compressor, reducing flows to Calcasieu Pass LNG by ~400 MMcf/d via TransCameron Pipeline over the weekend. The pipeline lifted the force majeure as of July 23.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a net injection of 13 Bcf into working gas for the week ending July 19.
Last week EIA reported a 10 Bcf injection, the lowest of the injection season so far, as hot summer weather stokes higher demand for power generation. Inventories would rise to 3,222 Bcf based on market estimates, in line with East Daley’s monthly Macro Supply & Demand Forecast. The surplus to the 5-year average would fall 18 Bcf to 447 Bcf while the surplus to last year would drop by 10 Bcf to 240 Bcf.
In the latest Macro Supply & Demand Forecast, EDA projects a cumulative injection of 675 Bcf over the next 16 weeks to reach 3,884 Bcf in inventory by the end of October. This implies an injection rate 18.6 Bcf/week lower than the 5-year average. For the first 15 weeks of the season, injections have only averaged 12.7 Bcf/week below the 5-year average. While injections are lower than last year’s pace, they must slow considerably from August-October in order to stay under demonstrated peak capacity of 4,203 Bcf. If capacity holders match the 5-year average injection rate each week, inventories would end up at 4,182 Bcf. Last year’s injection pace would result in 4,036 Bcf of inventories.
Rigs – US rigs are down 6 W-o-W to bring the total count to 549 for the July 13 week. The Anadarko and Marcellus+Utica basins each fell by 2 rigs while the Marcellus - NE PA is down 1 rig. The Permian is showing a decrease of 5 rigs, but the decline is likely due to rig moves and should recover next week. The DJ, Eagle Ford, Powder River and Uinta each added 1 rig on the week.
On the midstream side, Targa Resources (TRGP) is down 4 rigs with reductions on its Permian, Eagle Ford and Bakken systems. Enterprise Products (EPD) is up 4 rigs on the week with gains on its Permian and Eagle Ford systems.
East Daley’s weekly Midstream Activity Tracker monitors rig activity by basin and by gathering and processing (G&P) system to better understand midstream impacts. We allocate rigs and monitor flows through 150+ public and privately owned G&P systems in every North American basin. Reach out for more information on the Midstream Activity Tracker.