KMI's Rich Kinder's noteworthy comment re lng demand growth

[cmm3rd]

Kinder's projection of lng demand growth is noteworthy. I would assume it would all be for export.

Wave of Permian Basin gas takeaway projects could subside, Kinder Morgan says

A surge of planned natural gas takeaway capacity out of the Permian Basin in Texas and New Mexico may slow for a few years, with a Kinder Morgan Inc. executive saying that the market is "pretty well served until the latter part of the decade."

Kinder Morgan has proposed Permian natural gas pipeline projects, including the Gulf Coast Express expansion project, which had an open season for commitments from May 16 to June 6, and a possible greenfield pipeline to move gas out of the basin.

"With the projects including ours that have been [authorized] and are proceeding in the construction mode, there may be a near-term tightness. But once those projects go into service, we feel like the market is pretty well served until the latter part of the decade," said Tom Martin, Kinder Morgan's president of natural gas pipelines, on a July 20 earnings call.

"The next projects [that need a final investment decision] will likely come in sometime in 2024, maybe 2025," Martin said.

The company authorized a final investment decision June 29 to proceed with a 550 MMcf/d expansion on its Permian Highway Pipeline system that would bolster deliveries from the Waha area to Katy, Texas, and other U.S. Gulf Coast market areas.

The intrastate Whistler gas pipeline system will also get a 500 MMcf/d brownfield expansion project. The developers of the Matterhorn Express pipeline also took a final investment decision on the 2.5 Bcf/d greenfield project on May 19.

LNG growth

While Kinder Morgan might not anticipate more expansions from the Permian in the immediate future, it was still evaluating investments in a raft of planned LNG-focused pipeline expansions set to come online in the near future. The company increased feedgas deliveries by 16% year over year to 5.8 million Dth/d in the second quarter, as worldwide gas tightness, prompted by the Russia-Ukraine war, yielded incremental demand from Europe.

"Depending on which expert you listen to, the projections are [that over] the next five years ... you're going to have 11-14 Bcf/d in growth in LNG [demand]," said Executive Chairman Rich Kinder. "It's an incredible green shoot for Kinder Morgan."

Kinder Morgan is steering a $627 million expansion project that would add 2 million Dth/d in takeaway capacity on its Tennessee Gas Pipeline Co. and Southern Natural Gas Co. LLC systems, with additional feedgas aimed at Venture Global LNG's Plaquemines export project under development in Louisiana.

Strong global demand for U.S. LNG could also be the key to the GCX expansion project moving forward. Martin said Kinder Morgan is in discussions with additional customers to add pockets of capacity, primarily to serve LNG feedgas demand.

Financial results

Kinder Morgan's second-quarter results included an upgraded financial forecast for full-year 2022. The company now expects an increase of about 5% on a $2.5 billion net income target shared earlier in 2022. Growth in the company's natural gas gathering business, especially in Texas and Louisiana, as well as "attractive" renewals in its gas transportation business, supported the sunnier outlook.

Kinder Morgan earned a net profit of $635 million in the second quarter, up from a $757 million loss in the corresponding period of 2021.

Commodity Insights reporters Kelsey Hallahan and Dylan Chase write for S&P Platts Dimensions Pro. S&P Global Commodity Insights is owned by S&P Global Inc.

[dan_s]

Thanks for post this.

My belief is that global demand for U.S. natural gas (primarily LNG) is the key to my forecast that the days of "Cheap Natural Gas" in North America are over. I believe $5.00/MMBtu is the new floor and that ngas prices may move back to 1/6th the price of oil when our LNG export capacity ramps up sharply starting in mid-2024.

AR and EQT will report Q2 results after the markets close today. Their comments should be interesting as well.

AR should beat my forecast thanks to high NGL prices.

[cmm3rd]

This makes me wonder whether, and if so to what extent, the advent of large scale LNG global market is going to change (is changing) ngas pricing from being regional to more of a global market, somewhat like oil, permanently. Probably a complicated issue with multiple factors influencing effect on pricing, but intuitively some significant change in pricing globally could evolve over time given that such large volumes are being sold globally. With ngas increasingly being recognized as a necessary, transitional fuel (however reluctantly by some), it would seem that established producers with a lot of inventory should do well for the foreseeable future.

USA, with its vast ngas resources, very fortunate. Hopefully, pipeline constraints will eventually ease.

[dan_s]

1. I think the days of "Cheap Gas" for Americans is over since demand has finally caught up to supply. IMO $5.00/MMBtu should be the new normal for a few more years until our export capacity increases.

2. In 2024 US LNG export capacity will start growing again and by 2027 we will have over 20 Bcf per day of LNG export capacity + 8-10 Bcf per day of pipeline export capacity. At that point I believe global natural gas prices will move closer to energy content or 1/6th the price of oil, which means $16/MMBtu if the new normal for oil is $100/bbl. Even if oil pulls back to $60/bbl, we'd still have $10/MMBtu gas.

Wind and Solar will not have much impact on oil prices. EVs won't come close to the wishful thinking of the Wackos with respect to oil demand because only the wealthy will be able to afford them and our power grid cannot handle the increased demand anyway.

Natural gas is the "transition fuel" and the "transition" is going to take decades, not years. The outlook for our gassers is very bright.