Natural Gas Weekly: August 29, 2024
Infrastructure – Last week an LNG vessel docked at Plaquemines LNG for the first time. Only this vessel docked to deliver LNG, rather than receive it. Venture Global has opted to use a cooldown cargo at Plaquemines instead of pipeline feedgas during the commissioning phase, potentially shortening the time to ramp to first exports.
Cooldown cargoes are used to chill LNG tanks prior to liquefaction, allowing initial LNG production to be stored without excessive initial boiloff. Without a cooldown cargo, LNG tanks must be cooled using gas liquefied at the facility. This is significantly slower process because the initial LNG volume is far below what can be immediately transferred into the tanks from a cargo.
Theoretically, this means Plaquemines LNG can begin exporting cargoes and ramp to full capacity much sooner. Venture Global’s first facility, Calcasieu Pass, offers some guidance to the timeline for Plaquemines Phase 1, given that both are approximately the same size and use the same liquefaction technology. With pipeline feedgas, Calcasieu Pass reached 1.5 Bcf/d of gas intake approximately 6 months after it began the cooldown process. Note that, while Calcasieu Pass’s eventual max feedgas intake reached 1.6 Bcf/d, the final 100 MMcf/d took an additional two months to fill. For comparison purposes here, we treat 1.5 Bcf/d as our benchmark for when the facility is “fully ramped.â€
If we assume that Plaquemines LNG is able to ramp 30% faster using imported cargoes for cooldown, we should expect to see the facility taking 1.5 Bcf/d as early as January 2025.
Infrastructure – Kinder Morgan and (KMI) and Williams (WMB) are expanding pipeline systems to capture growing gas demand in the Southeast. New projects will help distribute Appalachian gas to a region with plenty of upside for growth.
On its 2Q24 earnings call, KMI announced the South System Expansion 4 (SSE4) to expand the Southern Natural Gas (SNG) system in Georgia and Alabama. Meanwhile, WMB is developing the Southeast Supply Enhancement (SSE) project to meet growing demand. Rapid population and economic growth create opportunities in the region. In Georgia’s most recent integrated resource plan (IRP), regulators estimate the state’s energy demand will grow by 6,600 MW by 2030.
The South System Expansion 4 will deliver 1.3 Bcf/d into Georgia and Alabama. KMI estimates a $3B project cost with an in-service in late 2028.
SSE4 will work in coordination with the SSE project on WMB’s Transcontinental Gas Pipe Line (Transco). WMB expects that expansion to enter service in 4Q27. SSE will expand Transco’s capacity by ~1.6 Bcf/d, with 1.3 Bcf/d of the capacity offered from Station 165 in southern Virginia to Station 85 at the Alabama-Mississippi border. SSE will provide more egress to flow south from the Northeast, and SSE4 will help deliver that gas to end-markets in Alabama and Georgia.
KMI has not identified the companies backing SSE4, but EDA speculates that Southern Company could be one of the anchor shippers. The utility’s Southern Company Services currently contracts for 1.2 Bcf/d across SNG and has contracts for 400 MMcf/d on Transco’s SSE Project to support existing and new power generation.
The themes of LNG exports, coal retirements, data center development, and onshoring of industrial plants will continue to create new demand, creating more opportunities for companies like KMI and WMB with long-haul infrastructure in the ground.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a net injection of 37 Bcf into working gas for the week ending August 23. The surplus to the 5-year average would fall by 6 Bcf to 363 Bcf while the surplus to last year would increase by 9 Bcf to 228 Bcf. Working gas totaled 3,299 Bcf as of the August 16 EIA survey.
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. This would imply that injections over the next 10 weeks (through October 31) would fall by 203 Bcf vs the 5-year average injection rate, or 18.5 Bcf per week. For the first 20 weeks of the 2024 injection season, the injection pace has trailed the 5-year average by 13.5 Bcf/week.
Rigs – US rigs decreased by 9 W-o-W to bring the total count to 547 for the August 17 week. Basins losing rigs include the Permian (-5), ArkLaTex (-2) Marcellus-NE PA (-1), the DJ (-1) and the Bakken (-1). The large drop in the Permian is most likely due to rig moves and should recover next week. The Anadarko Basin added 2 rigs on the week.
On the midstream side, Energy Transfer (ET) is down 3 rigs total with losses on its Permian and ArkLaTex systems. EnLink Midstream (ENLC) is down 5 rigs with losses on its Delaware and Midland systems. Enterprise Products (EPD) gained 4 rigs 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.