American Oil and Gas Reporter - December 2018 - 41

SpecialReport: Natural Gas White Papers
compared with last. By 2020, pipeline
exports to Mexico are estimated to reach
6.1 Bcf/d.
As more pipelines are completed to
reach markets across Mexico, it is likely
that LNG imports to Mexico will be partially displaced. TransCanada's Sur de
Texas-Tuxapan pipeline will bring gas
from South Texas to Tuxapan, where demand previously has been served by LNG
imports at Altamira on the eastern coast.
Once this 2.6 Bcf/d pipeline enters service,
LNG imports to Mexico are expected to
drop. The La Laguna-Aguascalientes
pipeline will ship gas from La Laguna to
Central Mexico, completing the supply
route all the way from the Permian Basin.
Residential and commercial are the
only sectors not forecast by NGSA to
increase consumption this winter. Of
course, in both sectors, demand is highly
dependent on weather, following an
almost perfect linear relationship with
total heating degree days. Assuming
NOAA's forecast of slightly warmer temperatures, combined residential and commercial demand is estimated to average
36.9 Bcf/d, or about 1 Bcf/d less than
winter 2017-18.
However, it should be noted that con-

FIGURE 3
U.S. LNG Export Capacity by Project
10
9
8
7
6
5
4
3
2
1
Ju
l-1
8
D
ec
-1
8
M
ay
-1
9
O
ct
-1
9
M
ar
-2
0
Au
g20

ov
-1
6
Ap
r-1
7
Se
p17
Fe
b18

N

Ju
n

-1
6

-
-1
6

Meantime, the Outlook says LNG exports and pipeline exports to Mexico
should experience major growth of 57
percent-contributing more than any other
sector to increased winter-over-winter
demand-and bring the environmental
benefits of low carbon emissions to overseas customers while providing jobs,
economic benefits and stability to the
U.S. market.
Demand for U.S. LNG exports are
forecast to average 4.7 Bcf/d (Figure 3)
this winter. Three new LNG trains-Elba
Island phase one, Corpus Christi train
one, and Sabine Pass train five-are scheduled to come on line this winter, translating
into 1.7 Bcf/d in new demand for LNG
exports to the 3 Bcf/d averaged last winter.
The new trains have contracts with
utilities in Spain, the United Kingdom
and portfolio traders, indicating that
some of the cargoes could land in Europe.
This past June, Rough Storage, a facility
that provided 70 percent of total U.K.
gas storage capacity, closed after 30
years of operations. The closure means
the United Kingdom now has about five
days' worth of storage capacity instead
of 15, which could cause prices to spike

Bcf/d

LNG, Pipeline Exports

during the winter months, attracting
U.S. cargoes.
However, the majority of U.S. LNG
cargoes still are expected to head to Asia,
the destination for 60 percent of all U.S.
cargoes shipped last winter. The global
LNG market was tight in 2018, as a
global supply glut caused by the newly
commissioned U.S. and Australian trains
was absorbed quickly by demand growth,
especially in China. Three new regasification terminals came on line in August
and October in China, further boosting
demand projections for this winter. LNG
demand also is poised to take off in India,
where demand was already reportedly
20 percent higher in the first half of 2018,
before two new large regas terminals
were completed and commissioned.
U.S. LNG exports to Mexico remain
high. Mexico's domestic gas production
stabilized this year, but shows no signs
of recovering to pre-2017 levels. Growing
demand in Mexico is requiring more imports in the form of either LNG or pipeline
shipments. Pipeline imports already have
pushed above 5 Bcf/d thanks to new
pipelines that came on line this summer,
and U.S. pipeline exports to Mexico are
forecast to grow by 0.8 Bcf/d this winter

Ja
n

electric heating demand. Also, fundamentals should place slightly upward
pressure on Henry Hub prices this winter,
discouraging coal-to-gas switching.
Another factor is the new combined
cycle gas turbine capacity additions in
the East region, which are more efficient
and consume less gas than older turbines
in the existing fleet. That should create
gas-on-gas competition, displacing generation from less efficient units. Last but
not least, continued gains in wind, solar
and renewable capacity will also limit
growth in gas burn and continue to compete for market share.
According to the Outlook, power demand will grow the most in the East and
South Central regions, where more than
10 gigawatts of coal capacity has been
retired since last winter. The Pacific region
is expected to see some declines in power
burn related to the retirement of 2.3 gigawatts of gas generation capacity since
the beginning of the last winter.

Sabine Pass LNG
Elba Island
Corpus Christi LNG
Sabine Pass LNG

Cove Point
Cameron LNG
Freeport LNG

Source: Energy Ventures Analysis

DECEMBER 2018 41



American Oil and Gas Reporter - December 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - December 2018

Contents
American Oil and Gas Reporter - December 2018 - Intro
American Oil and Gas Reporter - December 2018 - 1
American Oil and Gas Reporter - December 2018 - 2
American Oil and Gas Reporter - December 2018 - 3
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American Oil and Gas Reporter - December 2018 - Contents
American Oil and Gas Reporter - December 2018 - 6
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