U.S. LNG Dealmaking Picks Up With Benefits for Midstream

The global LNG trade increased almost 80% between 2015 and 2023. Drivers include economic growth, falling natural gas production in some regions, and a shift away from coal-fired power generation. Russia’s invasion of Ukraine in 2022 also added to global LNG demand as Russian pipeline exports were replaced.

Concurrently, U.S. LNG exports have ballooned, from practically non-existent in 2015 to nearly 12 billion cubic feet per day (Bcf/d) in 2024. Today, the U.S. is the largest exporter of LNG globally, leading Australia and Qatar. Notably, China stopped importing U.S. LNG as part of the ongoing trade war, but the large, global market for LNG allows U.S. cargoes to shift from China to other destinations.

Two US LNG projects were completed in the last few months: Venture Global’s (VG) Plaquemines LNG Phase 1 (1.6 Bcf/d capacity) and Cheniere Energy’s (LNG) Corpus Christi Stage 3 (1.5 Bcf/d capacity). With these projects online, U.S. LNG export capacity is now just above 17 Bcf/d. As shown below, four projects currently under construction are slated to increase capacity by 47% to 25.2 Bcf/d by 2028. LNG exports are expected to be the largest driver of incremental U.S. natural gas demand over the next few years, complementing demand for power generation and data centers (read more).

Growing LNG exports are expected to require more natural gas production, which in turn creates growth opportunities for midstream. Dry natural gas production in the U.S. is forecast to increase by 8% from 2024 to 2030 according to the US Energy Information Administration.

LNG exports (and growing gas production) require significant infrastructure between where natural gas is produced at a well and where it is ultimately liquefied for export. This includes gathering pipelines, natural gas processing plants, and the larger pipelines that feed LNG facilities. Companies focused on natural gas infrastructure represent 71.1% of the Alerian Midstream Energy Select Index (AMEI) by weighting as of April 17. This includes liquefaction companies Cheniere and NextDecade (NEXT).

Notably, all of the LNG capacity under construction is positioned along the Gulf Coast (see map below). These facilities will largely be supplied by the Haynesville, Eagle Ford, and Permian, with additional pipeline capacity being built to transport gas from these producing regions (read more).

Most recently, Kinder Morgan (KMI) announced plans to build the Trident Pipeline, which will bring 1.5 Bcf/d of natural gas to the Port Arthur area and help supply- Golden Pass LNG. Golden Pass also has a 20-year contract with Energy Transfer’s Gulf Run pipeline. Long-term pipeline contracts with LNG facilities represent attractive opportunities for midstream.

A handful of other projects are under development and could represent meaningful additions to U.S. LNG export capacity. These projects are working towards a positive final investment decision (FID), which is when developers formally sanction a project and start construction. Before reaching FID, projects need to secure financing and need sufficient sales agreements for their LNG. Sales contracts typically span 20 years and help de-risk these large, capital-intensive facilities (read more). As shown in the table below, multiple LNG projects are currently under development with a combined proposed capacity of 9.9 Bcf/d.

Multiple projects have achieved key milestones in recent weeks, announcing new equity partners or sales agreements.  Specifically, Commonwealth LNG, Energy Transfer’s Lake Charles LNG, and Woodside’s (WDS) Louisiana LNG announced equity investments in April. Equity partners share the burden of capital expenditures and can also help with offtake agreements. For example, MidOcean Energy agreed to fund 30% of Lake Charles LNG construction costs and receive 30% of its LNG production.

Companies have also had success in securing offtake. NextDecade now has sufficient sales agreements to support FID of Rio Grande Train 4, having announced 20-year contracts with Aramco  and TotalEnergies this month. In late March, Delfin LNG signed an agreement with SEFE for 1.5 million tons per annum (MTPA) for at least 15 years. That represents over 10% of the total capacity of its proposed three floating LNG vessels.

Finally, while at an earlier stage, Alaska LNG has been prominently supported by the Trump Administration. The proposed 2.6 Bcf/d export facility has seen interest from Japan, South Korea, and Taiwan as part of current tariff negotiations.

U.S. LNG capacity is set to ramp through 2028 and likely beyond as additional projects achieve key milestones on the path to a positive FID. LNG exports are the key driver of growing U.S. natural gas demand over the next few years. More projects can support more production growth and more opportunities for midstream.

U.S. LNG Export Capacity to Rise 80% by 2028

Natural Gas Pipeline Capacity Ramping Up in Texas

LNG Tailwind for US Natural Gas Intact as Projects Progress

Midstream’s Natural Gas Outlook Continues to Strengthen

AMEI is the underlying index for the Alerian Energy Infrastructure ETF (ENFR) and the ALPS Alerian Energy Infrastructure Portfolio (ALEFX).

For more news, information, and analysis, visit the Energy Infrastructure Channel.

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