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Pipeline infrastructure needed to help U.S. compete on low-cost gas as LNG demand seen rising

Jul 23, 2019
4 min read
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Tellurian Inc. speaks to Gastech News about what is driving the next wave of LNG projects 

What is driving this next wave of U.S. LNG exports?
The growth of Permian oil production will drive the next phase of LNG growth from the United States.
According to data from the EIA, BP Energy Outlook and Bloomberg, Permian oil drilling activity is expected to double Permian natural gas production from 2018 to 2025.  Unfortunately, approximately 1 bcf/d of natural gas is currently flared in the basin due to the lack of pipeline infrastructure required to evacuate associated gas. Beyond the environmental harm of flaring itself, this practice wastes valuable energy resources that could be exported to markets that require cleaner-burning natural gas to displace coal in emerging markets.
Flaring is costly and unsustainable. Without an outlet for the expected 20 bcf/d of natural gas produced in the Permian by 2025, oil producers may be forced to reduce oil drilling and production. We believe LNG exports are the answer to the U.S. natural gas supply push.

In addition to export facilities, what infrastructure is needed to enable U.S. exports?
The U.S. needs pipeline infrastructure. Anyone looking at a U.S. pipeline map might question this assertation as it appears to be a spaghetti bowl of infrastructure. However, today’s infrastructure is not designed to move the least expensive gas to premium markets on the U.S. Gulf Coast. In Louisiana alone, we estimate that natural gas demand will rise to at least 12 bcf/d by 2024.  

Will there be enough global gas demand to support all the LNG projects?
Global gas demand continues to develop and is coming from all over the globe.
China’s demand for natural gas is insatiable as the country seeks to reduce its air pollution and energy poverty. Tellurian estimates that Chinese demand for natural gas will be at least 500 bcm per year by 2030.  While some of that demand can be satisfied by domestic supply and pipeline gas, the country also has infrastructure constraints and continues to import LNG, with imports up 24 per cent year to date.  
Similarly, India is also working hard to resolve their own infrastructure problems to improve access to cleaner-burning natural gas. Nearly 1.2 million deaths in India were attributed to air quality issues in 2017 and 800 million Indian citizens continue to rely on biomass for heating and cooking. By 2023, India’s total re-gas capacity could more than triple to 60 mtpa from 2018 levels.
Europe’s LNG market continues to validate the flexibility of the global gas market as LNG imports have more than doubled so far this year compared to 2018 levels. Re-gasified LNG has displaced coal in the power sector as lower gas prices incentivised switching.
Overall, we anticipate LNG demand is expected to grow 12 per cent in 2019.  The U.S. is in a tremendous competitive position globally because of the vast amounts of low-cost gas available, and because we have proved in the first wave of U.S. LNG that we can build and produce very inexpensively. We believe there is over 100 million tonnes of new liquefaction capacity needed to satisfy worldwide demand.

How is Driftwood LNG progressing?
We have received all of the required permits to begin construction as expected in 2019. Commercially, we are in advanced negotiations with companies around the globe including Total and Petronet, and others in the Middle East. We are confident that we will reach FID in 2019.

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