A new report released on Wednesday by industry technology solutions firm DrillingInfo emphasizes the crucial role exports and infrastructure will play in the future growth of the U.S. oil and gas industry.
To emphasize the point, Bernadette Johnson, Vice President of Market Intelligence at Drillinginfo states that “Every incremental barrel of production since the middle of 2016 has been exported. As U.S. crude oil production grows, all incremental barrels are (and will continue to be) exported.” As the U.S. moves more and more into its new reality of being a net exporter of crude oil and a major global exporter of Liquefied Natural Gas (LNG), the rapid investment in and build-out of critical industry infrastructure becomes an increasingly-higher priority for the nation’s economy:
“This will be a busy year, and very telling for the future of the LNG export market,” continued Johnson. Three new facilities are expected to come online — Elba Island, Cameron LNG, and Freeport LNG. Additionally, currently operating terminals will be increasing their capacity with added trains in Sabine Pass and Corpus Christi. Beyond that, there are four projects already approved but not under construction, and many others have been announced. “If recent history has shown us anything, it’s that infrastructure doesn’t always come online as expected, and everyone, both the industry and investors alike, should expect some price volatility while the market balances itself,” she said.
Other Key Takeaways from the Report, a powerpoint for which can be found at this link.:
Crude oil exports have been growing since 2017 as U.S. production reached historic levels thanks to growth from prolific shale basins, which in large part produces lighter crude that is better suited for refinery fleets in Asia and Europe. Exports to Asia are finding new destinations as China’s imports have declined to virtually zero. Iranian sanctions by the U.S., the situation in Venezuela, and U.S.-China trade wars will play a big role in U.S. exports moving forward. The U.S. supply growth is likely to be exported rather than displacing currently imported volumes.
The LNG liquefaction market is the key player for natural gas exports. By the end of 2019, the U.S. will have six operating terminals and nearly 10 Bcf/d of capacity. Additionally, more than 40 Bcf/d and 20 terminals have been proposed in the U.S. However, Drillinginfo analysts expect U.S. LNG exports to reach 10 Bcf/d in 2023, as growth from non-U.S. LNG export facilities drives global LNG prices down.
For NGLs, strong production growth is expected to continue. Export markets will continue to grow, as supply will outpace domestic demand. As additional infrastructure hits the market, ethane, propane, and butanes will grow export volumes. Pentanes plus domestic demand is expected to grow in the short term, due to bottleneck issues and production cuts in Canada.