Natural Gas Weekly: September 4, 2024
Infrastructure –Golden Pass LNG is asking regulators for more time to complete construction on the Texas project following the bankruptcy of its lead contractor.
Last Wednesday (August 28), Golden Pass LNG filed a request with the Federal Energy Regulatory Commission (FERC) seeking an extension of time until November 30, 2029 to fully enter service. If granted, this extension would give Golden Pass three additional years to complete the liquefaction project.
Zachry Holdings, the project’s lead engineering, procurement and construction (EPC) contractor, filed for bankruptcy in May. Golden Pass LNG cited the bankruptcy and the switch to new lead contractor CB&I as the causes for the delay, leading to the latest request.
Golden Pass said it plans to ask for a similar extension from the Department of Energy (DOE) to push back the deadline on its non-Free Trade Agreement (non-FTA) and FTA export authorizations to March 31, 2027. This would give Golden Pass until 1Q27 to begin commercial operations at Train 1.
These deadlines contrast to those established during ExxonMobil’s (XOM) 2Q24 earnings call earlier this month. XOM is the majority stakeholder in Golden Pass. During the call, CEO Darren Woods said the project was now “looking at probably the back end of 2025 for first LNG,†five quarters before the deadline in the DOE extension request.
However, this discrepancy is likely just a precaution. Golden Pass has requested extensions from FERC twice since the project was first authorized, and said the new deadline would avoid the need to come back to regulators with yet another request.
East Daley Analytics includes Golden Pass LNG in the Macro Supply & Demand Forecast, and monitor it and other projects like in the “LNG Tracker & Export Stack†dashboard in Energy Data Studio (see figure). We had already pushed back the expected start date for Train 1 at Golden Pass to 1Q26 after the initial Zachry bankruptcy filing. While the latest extension request would give Golden Pass a longer runway, EDA does not currently believe this additional time would be necessary, and we are keeping the Train 1 in-service target in 1Q26.
Flows –The Permian Basin is on pace to grow ~7% in 2024 (exit-to-exit) despite rig counts decreasing by 12, according to East Daley’s latest monthly forecast.
Our Production Scenario Tools show Permian gross gas production increasing to 32.4 Bcf/d by YE28 with a ~9% reduction in rig counts. We expect Permian producers will drop another 13 rigs by YE26 before leveling off at ~275 rigs. At an average rig count of 298 through 2024, the Permian is on track to grow 1.73 Bcf/d exit-to-exit.
Extensive M&A activity has been responsible for most of the rig reductions since 2023 as drilling programs were combined and many companies dropped rigs to stay within corporate guidance. Rig counts also have been tempered in 2024 by gas egress constraints. As Matterhorn Pipeline comes online in October 2024 and ramps up to full capacity through March 2025, we expect drilling activity will pick up. The development of Blackcomb Pipeline (planned to come online in 2H26) means the Permian will avoid gas egress constraints we had previously forecast in 2026-27.
In the latest monthly updates to the Production Scenario Tools, we revised the Permian outlook due to increased initial production (IP) rates from wells drilled in the Midland sub-basin (IPs increased from 770 to 850 b/d), leading to higher gas-to-oil ratios (GORs) from new wells. Also, as 5 Bcf/d of egress capacity comes online between 2024-26, we expect producers to increase production via more well completions during 2025. The changes cause an average increase of 1.15 Bcf/d from today to the end of the forecast period in 2034.
Infrastructure – New Fortress Energy’s (NFE) Altamira floating LNG project was issued a non-FTA license by the Department of Energy, the first LNG facility to receive non-FTA authorization since the DOE paused permits in January. In August, the first LNG cargo set sail to Baja California, and NFE reported that full production of 0.4 Bcf/d was expected at Altamira the end of the month.
Does this new license mean the DOE’s ‘pause’ is over? East Daley is skeptical. Notably, DOE issued NFE a non-FTA license with a relatively short 5-year term. In the order, DOE notes that while NFE Altamira requests a term that extends through 2050, the authorization only extends through August 2029, suggesting that this is more an exception than a reversal of the pause. The larger onshore facilities affected by the pause, like Commonwealth LNG and Venture Global’s CP2, are backed by 20-year commitments and would need the long-term export authorization in order to serve their customers.
DOE states that it will review Altamira’s request for the long-term authorization no sooner than two years from the date of the latest order.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a net injection of 26 Bcf into working gas for the week ending August 30. The surplus to the 5-year average would fall by 25 Bcf to 336 Bcf while the surplus to last year would fall by 7 Bcf to 221 Bcf. Working gas totaled 3,334 Bcf as of August 23.
In the latest monthly Macro Supply & Demand Forecast, East Daley projects the surplus to the 5-year average will fall to 172 Bcf by the end of October. The surplus would need to fall by 164 Bcf over the next 9 weeks. Prompt month prices for October gas have fallen by 29 cents per MMBtu (12%) over the past two weeks. The 6- to 10-day weather forecast for the Lower 48 shows above-average temperature west of the Mississippi but below-average temps for the rest of the country. This indicates a fall cooldown and generally lower gas demand through the first two weeks of September.
Rigs – US rigs decreased by 3 W-o-W to bring the total count to 563 for the August 24 week. Basins losing rigs include the Permian (-3), DJ (-2), Bakken (-2) and the Uinta (-1). The large drops in the Permian and DJ are likely due to rig moves and should recover next week. The Anadarko, ArkLaTex, Marcellus+Utica and Powder River each added 1 rig on the week. On the midstream side, Enterprise Products (EPD) is up 4 rigs total with additions on its Permian and Eagle Ford systems. Phillips 66 (PSX) is down 5 rigs total with losses on its ArkLaTex, DJ, Eagle Ford and Midland 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.