Today’s report (week ended 6 Jul): EIA: +51 bcf, EA: +56 bcf
- Today’s print fell slightly below consensus estimates in the mid 50s bcf. While the number was closer to our 52 bcf flow-model prediction, to align our supply-demand model, we made a 0.4 bcf/d upward adjustment to our estimate of gas in power burn.
Next Thursday’s report (week ending 13 Jul): EA preliminary: +54 bcf
- We made a 0.6 bcf/d upward adjustment to our power burn estimate due to the weather and today’s baseline revision, which drops our preliminary estimate down to 54 bcf.
Feeding the LNG beast
LNG feedgas demand has continued its m/m gains in July despite dropping by 0.1 bcf/d w/w to 3.3 bcf/d in the reference week. With maintenance on the Creole Trail pipeline’s Gillis compressor station postponed from 8-10 July to an unscheduled later date, Sabine Pass has been running above 90% capacity every day this month. LNG feedgas to the facility has averaged 2.8 bcf/d so far in July, up by 0.3 bcf/d m/m. Cove Point shipped its third cargo of July this week, equalling its total for all of June, even as its gas intake has dipped by 0.1 bcf/d m/m to 0.5 bcf/d.
Meanwhile, the market is still anticipating the addition of several more trains into the US LNG export profile by early 2019. Cheniere received approval from FERC on 25 May to introduce fuel gas to commission Train 5 at Sabine Pass. For Sabine’s first four trains, there was an average of around 150 days between fuel gas approval and substantial completion. If that timeline holds true for Train 5, Cheniere could place the project into service as soon as October. A FERC filing dated 27 June detailing construction through the end of May indicated the project is ahead of schedule, with construction 90% complete. Even with this progress, Cheniere still noted that it projects substantial completion for Train 5 in June 2019.
Cheniere is also making progress towards start-up at its Corpus Christi liquefaction facility. FERC approved Corpus Christi’s Train 1 for onsite fuel gas use on 5 July, and flaring began two days later as the project moves towards commissioning. FERC also approved the introduction of therminol, or hot oil, to heat boilers onsite. The Port of Corpus Christi is granting Cheniere approvals as well, for a pipeline to deliver Permian gas to the facility. Substantial completion of Train 1 is expected by Q1 19, which would lag behind the 150-day timeline Cheniere has kept for its Sabine Pass trains, though Port of Corpus Christi CEO Sean Strawbridge has said he anticipates the 4.5 Mtpa (0.65 bcf/d) facility will ship its first cargo by the end of the year.
However, other projects appear to be increasingly at risk of delay to in-service dates. The five mini-trains Kinder Morgan is building at Elba Island in Georgia have not started the commissioning process, despite the company stating in its Q1 18 earnings call that the trains would come online every 30-45 days starting in Q3 18. The company’s most recent monthly update, filed with FERC on 18 June and representing May construction activity, showed that even installation of structural support steel was not yet finished. More mechanical equipment, such as temperature sensors and thermal oxidisers, was also not yet installed, putting Elba Island’s initial 1.3 Mtpa (0.2 bcf/d) of capacity very much in doubt for a 2018 start-up.
Cameron LNG likewise has not yet begun commissioning on its first train, though it is not scheduled for start-up until Q1 19. The 4.0 Mtpa train is in a similar state to Elba Island, with construction still focused on aboveground piping, electrical work, and the installation of heavy equipment, according to a 25 June FERC filing covering May activity. Construction progressed further in June, including the start of flares and the energisation of powerhouses. Using Cheniere’s schedule as an analogue, we would expect Cameron LNG to request approval for fuel gas use in September if Sempra Energy hopes to keep to the project’s Q1 19 in-service date.
The current state of global LNG markets is driving the enthusiasm for higher US exports. JKM prices sit above $10/mmbtu for the rest of 2018, with Jan-19 and Feb-19 trading above $12/mmbtu. High prices in Asia continue to be led by strong Chinese demand. Our estimates are for China to take an additional 14 Mtpa (2.0 bcf/d) in 2018, up by 35% y/y. China's response to escalating US tariffs on Chinese imports has yet to include LNG, and gas cargoes could be swapped out if tariffs were imposed. This new demand is not likely to be met by new Australian capacity in 2018. The three under-construction LNG facilities in Australia have yet to ship a cargo, despite expectations that each would by Q2 18. While Wheatstone has begun producing LNG, start-ups at Ichthys and Prelude have been pushed to Q4 18. With the JKM-TTF spread above $2/mmbtu through April 2019, the market is clearly looking for US LNG to head to Asia.
|Fig 1: US gas liquefaction facilities|
|Source: Company websites, Energy Aspects|