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Moody’s: US LNG capacity likely to double

FORECAST US liquefied natural gas (LNG) capacity is likely capacity now under construction and 25%-50%
to nearly double over the next 10 years, boosting of FERC-approved LNG projects would translate
medium-term midstream growth opportunities, to an additional 10-15 bcf per day flowing to US
says a new research note by Moody’s. That is even LNG facilities, says Moody’s.
if some of today’s proposed projects do not reach New LNG projects planned for starting ser-
completion. vice in 2025-26 and beyond must demonstrate
This will boost medium-term midstream access to long-term natural gas supplies., warned
growth opportunities, said Moody’s. Moody’s.
Rising global demand for natural gas has The report noted that several midstream
given US producers of LNG a “significant growth companies have already announced US mid-
opportunity”. But delivering on this opportunity stream projects that will supply gas to LNG facili-
will depend upon the timely construction of ties, including DT Midstream’s LEAP expansion,
natural gas pipeline infrastructure to support Williams’ Louisiana Energy Gateway, Energy
new US LNG supplies, and upon the continued Transfer’s Gulf Run, Kinder Morgan’s Permian
availability of long-term offtake commitments to Highway expansion, as well as WhiteWater’s
back financing for LNG infrastructure, says the Matterhorn pipeline project.
report. According to an accompanying Moody’s
Europe’s energy crisis should keep the LNG note, energy transition will remain the central
market tight until 2025-26, supporting cash flow business challenge for oil and gas producers this
generation for US LNG producers. decade and beyond. Recent policy responses
Most of the announced US LNG growth such as the Inflation Reduction Act (IRA) in the
projects up until 2025-26 have long-term com- US and the EU’s “Fit for 55” represent important
mitments from Asian buyers, it notes, which is energy-transition landmarks, but not enough by
the original source of the US LNG boom since themselves on the policy front to get transition
the mid-2010s, and international commodity on track.
traders have stepped up their LNG purchases in While policy risk will remain high for the sec-
2022. tor in 2023, energy security concerns will be on
But LNG producers require long-term an equal footing with energy transition efforts.
offtake commitments to underpin financing of A large majority of spending will be directed
new LNG infrastructure projects. LNG projects toward traditional oil and gas operations with a
should in turn spur further capital allocation for still small but growing share directed toward new
constructing new pipeline capacity to connect energy businesses.
the largest US gas-producing regions and new Europe’s emergent need for LNG amid the
export facilities. displacement of Russian gas will drive consid-
These new pipeline projects will need to erable investment over the next several years,
wi permitting approvals from the US Federal including a push to install more multi-dec-
Energy Regulatory Commission (FERC), and ade-lived assets and further supporting natural
likely overcome court challenges. gas’s incumbency.
Today’s US peak nameplate capacity of nearly Disparate transition strategies among the
14bn cubic feet (396.4mn cubic metres) per day largest integrated oil companies will further
reflects only about one-quarter of the capacity diverge in 2023.
of all announced LNG projects, of which there In the US, the IRA did provide “potential
are several major ones due online in the mid- benefits” for the oil and gas sector in the form of
2020s, including several with partial or full FERC expanded tax credits for investments in carbon
approval. As much as 10 bcf (283 mcm) per day capture and sequestration (CCS) and hydrogen.
is under construction. US-based majors and some midstream com-
Appalachia’s Marcellus and Utica basins panies will accelerate their investment in these
together contribute roughly one-third of US dry areas, Moody’s predicted.
gas production, but there is limited takeaway Permitting reform would remove obstacles
capacity, which has constrained growth for those and shorten the permitting processes for new
regions. energy infrastructure projects, accelerating the
In the fourth quarter of 2022, US dry natural development of oil and gas projects that would
gas production stood at 100 bcf (2.83 bcm) per need more infrastructure to become viable.
day, exceeding year-earlier production by 3%, A permitting reform measure failed to pass
largely due to increased drilling and pipeline Congress in late 2022, including assurances for
expansions in the prolific Haynesville region the completion of the Mountain Valley Pipeline
and rising volumes of associated natural gas project, and the issue of permitting is likely to
delivered by oil producers in the Permian region, come up again in 2023. Permitting is a vital issue
says the note. for oil and gas pipelines.™
The completion of two-thirds of the LNG

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