American Oil and Gas Reporter - May 2015 - 99

SpecialReport: Gas Compression Technology

U.S. Poised To Become LNG Exporter
By Tom Seng

TULSA-Gas shale plays and associated
gas from tight oil formations have led to
a U.S. supply bounty. In addition to upstream activity, the industry has directed
a massive capital investment toward building new midstream facilities, and constructing hundreds of miles of pipeline
infrastructure to bring new supplies to
market, and an almost endless number of
midstream and transportation projects are
planned for the near future.
All along the way-from the pad well
site and in-field gathering system, to the
processing plant and pipeline delivery
point-gas compression drives the flow
of gas throughout the domestic market.
With the United States seeking to become
a substantial global exporter of liquefied
natural gas, the role of gas compression
in the supply chain is only becoming
more critical.
How much compression horsepower
does one LNG export facility require? In
a report issued by Cheniere Energy, the
company says its Sabine Pass liquefaction
plant in Cameron Parish, La., will have a
total of 36 gas-fired compressors with a
rated output of 1.55 million horsepower.
The associated Mamou Compressor Station will have another four gas-fired compressors with an estimated 53,125 combined horsepower.
To put the horsepower requirement
for this single LNG export facility into
perspective, it represents about 40 percent
of the total horsepower expected to be
replaced over the next 10-15 years in existing pipeline compressor stations, according to estimates from the Southwest
Research Institute. Of course, millions
more horsepower in upstream and midstream applications will back up the
supply to each LNG liquefaction facility.
The types of compressors needed range
from small separable reciprocating units
to large gas turbines
The rationale for U.S. LNG exports-
and all the compression horsepower required to make them a reality-is straightforward. The U.S. Energy Information
Administration says a record 78.8 billion
cubic feet of gas a day was produced in
December 2014, and predicts that 2015
production will average 78.4 Bcf/d (40
Bcf/d coming from shale plays). Marcellus
Shale production alone grew from 1.3

Bcf/d in 2010 to 14.6 Bcf/d in February
2015. The Utica is producing another 2.0
Bcf/d.
On the demand side, EIA estimates
consumption will expand from 73.5 Bcf/d
in 2014 to 75.7 Bcf/d this year, largely
as a result of increased use in electric
power generation. Demand in the petrochemical industry also continues to grow
rapidly. This imbalance between supply
and demand makes LNG exports an attractive option both for the natural gas
industry and the broader U.S. economy.
Traditionally, the United States has
been an importer of LNG, which was
used mostly for peaking purposes in power
generation during severe weather conditions or supply disruptions. Import facilities
are located offshore Massachusetts, Maryland, Georgia, and along the Gulf Coast.
With the new sources of U.S. supply,
LNG imports have diminished steadily
since their peak in 2007-08. And while
not a net exporter, the United States has
been exporting LNG for years from a
Conoco-Phillips facility in Kenai, Ak. In
addition, market conditions make the
United States a "virtual" exporter in that
both stored LNG and tankers of preordered
LNG bound for the United States are
being sold to international markets. These
"re-exports" also include trucking LNG
into Mexico.
Until the decline in global oil prices,
the international LNG market was priced

substantially higher than the U.S. domestic
market. As recently as June 2014, imported
LNG prices for India, China, Japan and
Korea ranged from $13.75 to $14.35 an
MMBtu (Figure 1). All the while, the
U.S. benchmark natural gas price at Henry
Hub was in a steady decline because of
the new supplies. Inter-regional price
spreads were huge, creating large margins
for exporting U.S. gas in the form of
LNG.
Supply And Demand
The three world leaders in LNG production and exports are Qatar, Australia
and Malaysia. However, Australia has
two mammoth production and exportation
projects under way off its west coast
(Gorgon and Ichthys), which should move
it past Qatar into the number one spot in
the next year or so.
In the United States, it is expected
that about 2.0 Bcf/d of LNG will begin
to flow later this year (Cheniere LP's
Sabine Pass project), with considerably
more possible in the coming years. New
finds in East Africa will move that region
higher in the standings also.
According to BP's February 2015 Energy Outlook, worldwide LNG supply
will rise from approximately 30 Bcf/d
today to 80 Bcf/d by 2035. An 8 percent
annual increase in production is expected
to add 20 Bcf/d of supply by 2020, while
48 Bcf/d over current levels will be

FIGURE 1
World LNG Estimated June 2014 Landed Prices ($/MMBtu)

Source: U.S. Energy Information Administration

MAY 2015 99

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