Natural gas prices have been in a nosedive for the past five weeks, as relatively mild temperatures and record dry gas production have boosted US gas storage levels. Even after a larger than expected draw of 117 billion cubic feet (bcf) last week, EIA gas storage was still 7.3% above a year ago and 6.7% above the five-year average. The EIA reported that the US ended the injection season on October 31 with the largest amount in storage in three years.
One factor that has contributed to the buildup in supply has been a plateau in exports. US exports reached a total of 650.8 bcf in March, and they ranged from 607.3 to 634.5 bcf from April through September. These readings were still among the top 12 on record. The five largest monthly pipeline export totals (gas shipped to Canada and Mexico) have occurred since March.
Since March 2021, most US gas exports have been in the form of liquified natural gas (LNG). LNG is formed by cooling natural gas to minus 260 degrees Fahrenheit. The resulting liquid is 600 times smaller in volume than the gaseous form. This allows natural gas to be shipped to areas that are inaccessible by pipeline. There are some shipments by truck, but most LNG is shipped by specially designed tanker ships.
There was a sharp decline in US LNG exports during 2022 after a fire at the Freeport export terminal in Texas took a significant portion of export capacity off-line. Even with the setback, LNG maintained a larger share of US gas exports than pipeline gas exports. The Freeport terminal restarted operations in February, and in October, the US Federal Energy Regulatory Commission approved a request that would allow them to return to full capacity.
There are four US LNG plants currently under construction that are expected to start operations within the next five years, and another two plants have had their construction projects approved. The US has already overtaken Qatar to become the world’s largest LNG exporter. Once the new plants come online, US LNG exports could increase more than 50% from current levels.
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Originally Published December 8, 2023
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