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How Cheniere Energy Is Placed for the Rest of 2017 and Beyond

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Part 4
How Cheniere Energy Is Placed for the Rest of 2017 and Beyond PART 4 OF 10

What’s Driving Cheniere Energy’s Natural Gas Supply?

Natural gas supply

In this article, we’ll take a look at the factors driving uninterrupted natural gas supplies to Cheniere Energy’s (LNG) liquefaction plants. Cheniere Energy’s natural gas supply has been driven by a strong US natural gas supply and pipeline infrastructure. The US shale revolution has resulted in massive natural gas production growth.

US drillers such as EQT Corporation (EQT), Rice Energy (RICE), and Antero Resources (AR) have continued to grow their natural gas productions despite the weakness in natural gas prices. According to Cheniere’s recent investor presentation, “At current 3-train run rate, Cheniere is the largest physical natural gas consumer in the U.S.” The IEA (International Energy Agency) expects 50% of US natural gas supply in the coming years to be used for LNG production.

What’s Driving Cheniere Energy’s Natural Gas Supply?

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According to the IEA, the United States “will account for 40% of the world’s extra gas production to 2022 thanks to the remarkable growth in its domestic shale industry. By 2022, US production will be 890 bcm [billion cubic meters], or more than a fifth of global gas output. Production from the Marcellus, one of the world’s largest fields, will increase by 45% between 2016 and 2022, even at current low price levels, as producers increase efficiency and produce more gas with fewer rigs.”

The Marcellus region currently produces 13.5 Bcfpd (billion cubic feet per day) of natural gas per rig.

Natural gas pipelines

The natural gas pipeline network is the second most important factor supporting an uninterrupted supply of natural gas to Cheniere Energy’s SPL (Sabine Pass liquefaction) plants. 

According to a recent presentation by Cheniere, “Diverse and redundant pipeline network has allowed SPL to reach into almost every North American supply basin.” The SPL trains are currently connected to Cheniere Energy Partners’ (CQP) CTPL Pipeline, Kinder Morgan’s (KMI) NGPL and KMLP pipelines, and Williams Partners’ (WPZ) Transco Pipeline.

These midstream service providers are set to benefit indirectly from the growth in US LNG exports. Williams Partners currently has long-term contracts with four out of the six LNG projects under construction. For a recent in-depth analysis of Williams Partners, read Williams Partners Seeks Safety amid Uncertainty in Energy Sector.

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