US LNG feedgas demand falls as shoulder season maintenance begins in earnest - S&P Global

Houston — Total US LNG feedgas demand fell to its lowest level in almost six weeks April 8 as scheduled pipeline maintenance substantially reduced flows to Cheniere Energy's Corpus Christi Liquefaction terminal in Texas, initial nominations compiled by S&P Global Platts Analytics show.

Such work is typically conducted in the spring, during April and May. Maintenance may be lighter this year due to unplanned downtime during winter 2020.

Feedgas demand is still high due to favorable market conditions, though down from the record 11.94 Bcf/d set March 20. Platts JKM is forecast to average about $6.50/MMBtu for the balance of this summer, bearish to the curve by about $0.70/MMBtu, allowing the JKM/ Dutch TTF spread to widen marginally through summer to $1/MMBtu on average, just enough to keep pulling in the necessary African and North American swing LNG supply.

Gas deliveries to the six major US liquefaction facilities totaled 9.46 Bcf/d on April 8, the lowest level since Feb 26, Platts Analytics data show. The depressed level was due largely to a drop in deliveries of 2 Bcf/d to Cheniere Energy's Corpus Christi Liquefaction facility in Texas, based on initial nominations that were subject to be revised.

The flows were impacted by a planned maintenance on Corpus Christi Pipeline's Sinton compressor station that was scheduled to last for eight hours April 8, according to a notice to customers. The work involved annual emergency shut down testing. Because of the short duration, it was likely that actual gas deliveries to the terminal would be revised higher if gas was able to be delivered to the facility later in the day.

Also April 8, the Cove Point Pipeline, which feeds the Berkshire Hathaway-operated Cove Point Liquefaction facility in Maryland, was reporting an outage due to unplanned maintenance involving one engine at the Pleasant Valley compressor station in Virginia. The facility was being evaluated to determine the estimated duration of the outage, according to a notice to customers. While feedgas deliveries to the LNG terminal were stable above 700 MMc/d on April 8, based on initial nominations, there could be a small pullback in deliveries during the duration of the pipeline maintenance.

Cheniere's Creole Trail Pipeline, which feeds Cheniere's Sabine Pass liquefaction facility in Louisiana, has scheduled maintenance at its Gillis compressor station from May 3-7, according to a notice to customers.

Market outlook

So far this April, feedgas deliveries have remained strong at as the Gulf Coast netback into both JKM and TTF remain around $2-$3/ MMBtu for the remainder of 2021.

Despite supply-side growth and a shift in trade flows, the JKM, the benchmark for spot-traded LNG delivered to Northeast Asia, has recently found support, rising from a 2021 low of $5.56/MMBtu in the first week of March to close at $7.35/MMBtu on April 8. This increase can be attributed to a supportive backdrop in the wider commodity complex, where TTF, JKM's main anchor, has been firmly buoyed higher by record EU carbon prices, strong coal prices, and stronger oil prices, according to Platts Analytics.

Record LNG exports out of North Africa along with strong US LNG export volumes have outweighed persistent supply-side constraints in Norway, Trinidad and Tobago and Malaysia, in turn pushing global LNG supply into year on year growth and holding global liquefaction utilization at about 72%. There is considerable upside supply risk through shoulder season from Qatar and the US, if maintenance is lighter than usual, Platts Analytics data shows.