Intelligence brief: New England pipelines seen as costly choice; Smaller liquefaction projects expected
Gas industry news you need to know.
Study questions gas pipeline build in New England
New England does not need additional natural gas pipeline capacity to maintain electric reliability for the next 15 years, according to a study commissioned by the office of Massachusetts Attorney General Maura Healey and released on November 18.
The report, which was prepared by economic, financial and strategy consultancy Analysis Group, says that the region’s electric reliability needs can be met more cheaply and cleanly through energy efficiency and demand response.
The study found that under business-as-usual circumstances, New England can maintain electric reliability through 2030 even without additional new natural gas pipelines.
Under a stressed scenario, the system would need up to about 2,400 MW more power on several days per year by 2030, the equivalent of an additional 0.42 billion cubic feet per day of new gas capacity in the coldest weather.
The study modelled the ratepayer costs and carbon impacts per year of different solutions that could meet the reliability needs when the system is stressed (see graph below):
• Reliance on incremental dual fuel-power plants (the status quo).
• Higher reliance on firm liquefied natural gas (LNG); incremental natural gas capacity.
• Energy efficiency and demand response.
• Energy efficiency and low-carbon imports on existing transmission.
• Energy efficiency and low-carbon imports with new transmission.
The study concluded that while all of the solutions would ensure the reliability of the electric system in a worst case scenario, investment in energy efficiency and demand response would produce the greatest customer savings and would reduce GHG emissions.
By comparison, new gas pipeline infrastructure would result in less customer savings and would drive up GHG emissions, according to the report. Energy efficiency combined with firm low carbon imports on existing transmission lines would also save customers money and would produce the greatest reduction in GHG emissions.
New England currently relies on natural gas to produce 44% of its net electricity needs and its total generating capacity, according to 2014 data by ISO New England, and could grow that to 50% by 2024 if several proposals for new gas pipelines in the region go ahead.
Annualized Cost and Emission Impacts, By Solution Set ($2015 mil). Source: Analysis Group, Office of Massachusetts Attorney General of Maura Healey.
Future LNG export projects to focus on smaller facilities
The next wave of LNG export projects in the US will likely be dominated by smaller-scale liquefaction facilities, according to SNL Energy.
While the large-scale export projects currently under construction have an average capacity of roughly 9 mtpa, future LNG projects will have an annual capacity of 1-3 mtpa each, Mitch Fane, Ernst & Young LLP's U.S. oil and gas transaction advisory services leader, told SNL.
The smaller scale will allow the additional liquefaction facilities to come on stream faster than larger plants.
Project developers would be better positioned to sign long-term contracts to finance new construction once the LNG volumes from existing projects around the world are cleared, energy consultant Fereidun Fesharaki said in an interview with SNL.
However, even smaller LNG capacity additions, such as expansions of existing facilities, will face higher scrutiny due to a weakened global market and concerns about project overbuild.
Half of Cheniere’s LNG exports to head to Europe
About 50% of Cheniere's future US LNG supply will likely go to Europe, but low gas prices would also give European buyers the option to send cargoes onward to other markets, Cheniere Marketing President Jean Abiteboul said at a conference in Geneva on November 18, Platts reported.
LNG demand in China and India remains uncertain, Abiteboul added, and the gas price would be the key factor in where LNG cargoes go.
According to Abiteboul, given a TTF price of around $6.40/MMBtu, an exporter of US LNG to Europe could still expect a margin of $2/MMBtu once all costs – including the cost of the gas, liquefaction and transportation – were factored in.
Cheniere has 31.5 mtpa of liquefaction capacity under construction at Sabine Pass and Corpus Christi but plans to expand it to 60 mtpa by 2025. The company expects it will ship the first cargo in January 2016.