U.S. Gas Supports Long, Difficult Rise of Atlantic Coast LNG Developments
Chesapeake Monitors Mid-Atlantic LNG Projects
US LNG Exports Forecast at 22 Bcf/d by 2027
U.S. natural gas producers are closely watching efforts to launch new LNG terminals on the U.S. Atlantic Coast, as LNG developers in the region attempt to thwart potential community resistance and unique business considerations for get the projects started.
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“There are a few companies trying to get [LNG] operating plants in Maryland as well as on the Delaware River, and I would love to be involved in those conversations,” Dan Lopata, Marcellus vice president for Chesapeake Energy, told Hart Energy America’s Natural Gas Conference in Houston Sept. 27. “Chesapeake is ready and willing to have these conversations, but there are a few hurdles to jump through on the infrastructure side before we can really seriously answer the question of whether there is likely to be more LNG on the East cost.”
The war in Ukraine and subsequent sanctions against Russian energy have created an acceleration in additional demand for LNG from the United States, with a number of projects under development on the Gulf Coast promising to more than double. US LNG exports by 2027. But a few projects on the Atlantic coast also hope to meet that growing demand later this decade, even as potential community resistance and licensing headaches threaten to defy traction.
Penn LNG’s proposal
Penn LNG is a company trying to add LNG export capacity to the Atlantic coast through a proposed 7.2 million tpa project on the Delaware River in Pennsylvania, not far from Philadelphia. The project, which the company hopes to enter the Federal Energy Regulatory Commission’s formal application process in 2023, recently had discussions with a “major gas producer” interested in a tolling deal, the company’s chief executive said. company at the Hart Energy conference in September. 27.
And while much attention has been paid to the terminals being developed on the Gulf Coast, the senior Penn LNG executive says the project’s lower profile is part of its strategy to engage with community groups. along the Delaware River long before moving forward with its FERC application.
“What we’ve tried to do is keep the project out of the spotlight,” Franc James, president and CEO of Penn LNG, told S&P Global Commodity Insights on the sidelines of the conference call. “The Northeast is a completely different environment than the Gulf Coast.”
Penn LNG has yet to announce the final site for its project, but that hasn’t stopped community groups near potential locations in Pennsylvania from preparing their opposition to the project. A community group in Chester, Pennsylvania, told S&P Global in June that it planned to oppose the project if the area was chosen as Penn LNG’s final location.
James told S&P Global that Penn LNG’s commitment to sourcing certified gas and its reliance on electric drive technology, rather than gas turbines, demonstrates its commitment to environmental responsibility. and his respect for members of the community bordering the Delaware.
In addition to community or infrastructure challenges, new LNG terminals along the Atlantic coast could face shorter demand compared to Gulf Coast projects that are expected to come on stream in the next few years. Some market watchers have recently suggested that the launch of LNG terminals on the East Coast later in the decade risks outpacing European demand, which could decline in the long term due to Europe’s tightly-set decarbonization targets.
“Europe’s LNG needs are large in the near term but extremely uncertain beyond 2030,” researchers at Columbia University’s Center for Global Energy Policy said in a study published Sept. 22. “There are … open questions about Europe’s willingness to commit to significant volumes under long-term contracts given the continent’s desire to accelerate the energy transition.”
Europe’s climate agenda includes a target to use renewables for 45% of all energy needs by 2030, signaling a drop in demand for imported gas in the future. But the region’s plans to reduce reliance on Russian gas even sooner will complicate those goals, as buyers may have to agree to long-term LNG supply deals to meet near-term demand. S&P Global forecasts U.S. LNG exports to exceed 22 billion cubic feet per day by 2027, up from 11.9 billion cubic feet per day recorded in 2022 to date, in part due to Europe’s plan to cease all imports of Russian gas by the same year.
For its part, Penn LNG expects that the structure of its LNG supply agreements – which are based on terms of 14 and 15 years, rather than the more typical 20-year terms in the industry – appeals to European buyers by providing them with more long-term flexibility to pursue these decarbonization goals. The project’s targeted commissioning date also closely matches the planned launch of new regasification terminals in Europe.
“Europeans are concerned about European Commission directives and about individual countries and their directives,” James said. “The focus is on 2045, 2048 and 2050.
“Fourteen-year terms also align us with the regas terminals being built. … When you consider when these regas terminals are going to receive their first LNG, we fit in very well.”
If Penn LNG is able to navigate the unique permits and commercial considerations facing a Northeast LNG project, there should be no shortage of feed gas supply options. In addition to Chesapeake, U.S. gas producer EQT recently voiced support for more LNG terminals near Appalachian gas production, and Penn LNG previously cited Coterra Energy and Seneca Resources as other potential gas suppliers. The company is developing talks with Williams and Enbridge for gas transmission and could develop last-mile infrastructure in Pennsylvania to connect the facility to nearby gas transmission systems.
Penn LNG hopes to enter the FERC pre-filing process later this year, ahead of its formal application in 2023, with an eye to bringing its first LNG cargo into service in late 2027.