American Oil and Gas Reporter - April 2018 - 73

EMPOWERING THE FUTURE
LNG CHANGING THE GAME

Cheniere Energy's Sabine Pass ushered in a
Q: new
era of U.S. energy exports when its first
LNG train commenced operations in February 2016.
With Sabine Pass bringing additional trains on stream
last year, how much LNG did the United States export
in 2017? Dominion's Cove Point started up earlier this
year. How much LNG does EIA forecast the country will
export in 2018? What new export facilities will be
coming on line in 2019? What will the volume of daily
LNG exports be at the end of 2019?

ZARETSKAYA: Two new trains were commissioned at
Sabine Pass in 2017, bringing the facility's nameplate capacity
to 2.8 billion cubic feet a day. Because it takes time for
liquefaction trains to ramp up, there is typically a lag between
when a train comes on line and when it reaches full production.
In 2017, lower LNG demand during the spring and fall shoulder
months in Asia and Europe, and disruptions caused by Hurricane
Harvey in August, reduced overall utilization of Sabine Pass
liquefaction trains. Consequently, annual utilization of Sabine
Pass trains averaged 80 percent, up from 50 percent in 2016.
With Sabine Pass train three coming online in January
2017 and train four in August, U.S. LNG exports essentially
quadrupled year over year in 2017, from 500 million cubic
feet a day in 2016 to 1.94 Bcf/d. The United States supplied
LNG to 25 countries last year, and we estimate that 60 percent
of the 1.94 Bcf/d of exports were traded on a spot basis. Two
contracts with South Korea started in 2017, and in terms of
destinations, Mexico, South Korea and China accounted for
more than 50 percent of all U.S. LNG exports. The rest went
to a number of countries in smaller quantities.
Going forward, seasonal consumption patterns in importing
countries will impact the level of LNG demand in consuming
markets. Similar to the U.S. natural gas market, Asia and
Europe have clear seasonal patterns with dual peaks in winter
and summer (winter peaking demand is higher than summer).
Sabine Pass is pretty much operating at close to maximum
nameplate capacity now, with the capacity factor averaging 95
percent in both November and December, but in the winter of
2016-17, when LNG demand in Asia was very high, U.S. liquefaction utilization hit an all-time high of 96 percent in December
2016. Demand for U.S. LNG this past winter was driven by
very high natural gas demand in Europe and Asia, particularly
in China.
That story likely will repeat in winter 2018-19 because only
Dominion Energy's Cove Point and Kinder Morgan's Elba
Island facilities are expected to come on line this year. Cove
Point, which has a capacity of 750 MMcf/d, shipped its first
cargo in March. Elba Island is a small project with 200 MMcf/d
of combined capacity from six of 10 planned modular liquefaction
units slated to start up the summer. Sempra's first train at
Cameron could come on line by December, but it may be

delayed until spring 2019.
That means high utilization is expected at Sabine Pass, Cove
Point and Elba Island next winter, possibly close to nameplate
capacity again. With the relatively small additions of liquefaction
capacity, we forecast LNG exports averaging 3.0 Bcf/d-3.2
Bcf/d on an annual basis in 2018.
The pivotal year for U.S. LNG is 2019, with three new
projects scheduled to begin service along with the remaining
four units at Elba Island (expanding capacity by another 130
MMcf/d combined) and a fifth liquefaction train at Sabine Pass
(adding 700 MMcf/d in capacity). The new facilities are:
* Freeport with three 680 MMcf/d trains (2 Bcf/d total capacity);
* Cameron (three 600 MMcf/d trains (1.8 Bcf/d total); and
* Corpus Christi (two 600 MMcf/d trains (1.2 Bcf/d total).
The combined liquefaction capacity expected to come on line
in 2019 is 5.83 Bcf/d, expanding total U.S. export capacity to 9.6
Bcf/d (3.5 trillion cubic feet a year). Again, it will take time for
the trains to ramp up to full capacity and for global markets to
absorb this high volume. In fact, some trains may be delayed
until 2020, so we do not anticipate the terminals operating at the
9.6 Bcf/d nameplate capacity until 2021 or possibly even 2022.
Even so, this is a major influx of new LNG capacity. If all
trains complete construction as currently announced and ramp
up in optimal time, we expect U.S. LNG exports to average 4.8
Bcf/d (1.75 Tcf/year) on an annual basis in 2019 and increase
to 6 Bcf/d (2.2 Tcf/year), or 62.5 percent of total nameplate capacity in the winter months of 2019.

The strength of the global LNG market has surQ: passed
many forecasters' expectations. Where

are U.S. LNG exports primarily being landed today?
How do you see demand shaping up through 2020?
Where will the main destinations be for U.S. LNG over
the next two-three years? Looking longer term, how
much growth do you see for worldwide LNG consumption
through 2030, and how much of that growth ultimately
will be met by U.S. supplies?
ZARETSKAYA: EIA's preliminary estimates indicate that
global LNG demand grew by 8 percent in 2017, or almost 3
Bcf/d (from 34.7 Bcf/d in 2016 to 37.5 Bcf/d in 2017). This is
the single largest annual increase in global LNG trade history
and the largest annual growth since the Fukushima disaster,
when global LNG demand increased by 2 Bcf/d between 2010
and 2011.
The lead story of the past year was tremendous growth in
natural gas demand in China, primarily because of coal-to-gas
switching in industrial and residential boilers, which increased
LNG demand by 46 percent year over year (3.4 Bcf/d in 2016
to 5.0 Bcf/d in 2017) as well as increasing LNG imports in
South Korea and southern Europe.
With so much new U.S. LNG supply entering the global
market, the import markets need time to fully absorb this
volume. Mexico was the largest destination market for U.S.
APRIL 2018 73



American Oil and Gas Reporter - April 2018

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