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Michael Bennett, energy expert at PA Consulting Group, discusses liquefied natural gas (LNG) exports.
Michael notes that while the market is tight, it also has been waiting for LNG export demand to emerge for years. “Weather will be and always has been the great unknown with gas markets. 2018 will certainly be a test given that Sabine’s train 4 and Cove Point alone could add an additional 1.2 Bcf/d of demand, but production has started to climb as of late and increased demand could open the door for further production gains.”
He adds that the high demand experienced to date could foretell what’s to come if cold weather arrives. “Demand peaked in the upper 90s Bcf/d on Oct. 10, representing some of the highest early winter demand on record. This was possible due in part to new export dynamics from both Mexico and LNG. With storage inventories sitting roughly 100 Bcf below the five-year average, a cold winter and this new baseload export demand could result in much larger swings in demand and spot prices.”
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Meanwhile, the growth in LNG exports, particularly on the East Coast, has undoubtedly been a consideration for some E&Ps making their production plans for 2018.
Michael says: “Unless these producers have enough drilled but uncompleted wells to support an extra 600 [Mcf] or so a day of demand, they have most certainly been preparing for this new demand.”
He adds: “With Cabot being subscribed to large amount of the Atlantic Sunrise project, the producer can opt to send these molecules to the Atlantic Seaboard and Southeast in the event gas is not needed at the Cove Point, which will put downward pressure on pricing in these regions.”