As the world grapples with energy security and the transition to a more sustainable future, the natural gas industry in North America has emerged as a crucial player in the energy mix.

Despite the sentiment, trouble building infrastructure, securing new permits and geopolitical tensions persist.

A panel of E&P, midstream and LNG executives at the CERAWeek by S&P Global conference discussed the region's role in tackling the global energy crisis as natural gas plays an increasingly prominent role in supplying Europe and Asia with fuel.

"As we look at demand over the next 10 years, we see over 40 Bcf of demand, primarily driven by LNG exports from the U.S., but also significant amount of demand coming from the power sector," said Tina Faraca, executive vice president and COO of TC Energy’s natural gas pipelines.

According to the Energy Information Administration, proved reserves of U.S. natural gas increased 10%, from 625.4 Tcf at year-end 2021 to 691 Tcf at year-end 2022, establishing a new record for natural gas.

The abundance of natural gas in the U.S. and North America has positioned the continent as a reliable power supplier to the world as global demand continues to surge.

U.S. LNG exports such as Cheniere Energy say approximately 95% of their capacity is contracted out on a long-term basis, according to Anatol Feygin, Cheniere’s executive vice president and chief commercial officer.

For 2022 and part of 2023, “Cheniere’s produced LNG was a larger LNG supplier to Europe than any single country,” Feygin said. “So I think that speaks to the credit of the U.S. business model and its ability to respond to price signals.”

Southeast Asian countries are also seeing emerging growth in LNG demand. Some of those countries, which historically had their own gas supplies, are now becoming LNG customers as their domestic resources deplete.

“That building block of having a robust system and a robust resource that we think can continue to be developed in the mid-$3 range is what keeps us in business in terms of demand,” Feygin said.

For TC Energy, the company moves about 30% of natural gas across North America, Faraca said. "And we're seeing significant demand growth, particularly from LNG exports and the power sector.”

Faraca sees LNG export demand increasing by approximately 28 Bcf/d—in part as terminals in the Gulf Coast and Mexico come online. And for the power sector, TC Energy sees about a 10 Bcf/d demand increase, she said.

However, the industry is challenged with lack of investment in infrastructure needs to unlock the full potential of North America's natural gas resources. And the panel argued that permitting delays are holding back development.

“We have to get that supply from the basins to where the demand centers are,” Faraca said. “And whether that's expanding the existing infrastructure that we have and or building new infrastructure, we'll need more of that to support that.”

Even a fast-tracked permit can stretch longer than two years, especially for intrastate pipelines.

Approvals can be rigorous and timelines are getting longer, Faraca said. “We just had a project that was probably the fastest FERC (Federal Energy Regulatory Commission) approval we had in many, many years, and that was still about 28 months."

Cheniere currently has a diversified portfolio in Texas and Louisiana along the Gulf Coast where it continues to build infrastructure.

“We received our permit from the FERC for two more trains, which we call Midscale 8 & 9, at the Corpus Christi facility,” Feygin said. “So that regulatory process rides a slow horse, but it rides and much more effectively on our side of the business on the Gulf Coast.”

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Not only is there a desire to streamline and improve permitting timelines, but permits also need to be bulletproof, the panel urged.

"These things [permits] need to be durable, so we need to make sure that they're approved in a way that we're not litigating them for decades," said Andy O’Brien, ConocoPhillips senior vice president of strategy, commercial sustainability and technology.

O’Brien said that permitting had gotten tougher over the past four years, in particular for pipelines.

Conoco has no problem with gas supply or transporting it to the Lower 48, but “we have to get these permitting pieces. That is kind of the critical step to making this go at some pace and basically being able to deliver all of this gas to power the LNG facilities and to power the demands for AI.”

But O’Brien remains optimistic under the new administration that the industry will see improvement in the process.

Balancing natural gas market

O’Brien highlighted the energy industry’s evolution leading to LNG development backed by long-term contracts while keeping a balance between long-term gas contracts and the spot market.

"We at ConocoPhillips have been in the LNG business for 60 years, from the beginning, and until we started doing LNG. Think about how LNG started. It was a stranded gas resource to a dedicated facility and [under] a long-term contract to back building that facility," O’Brien said.

However, the industry has since shifted toward more flexible contract structures as gas has become an abundant commodity.

"What's different is basically you have an abundance of gas. So, the model for North America was a little different in terms of how we're putting this [market] together,” O’Brien said.

Spot prices have gained importance for natural gas “in terms of just operationally making the market work. And when we do see sort of these changes in demand supply, it's spot that basically drives liquidity," O’Brien said.

For ConocoPhillips, O’Brian said the company looks to keep an element of its contracts or sales on spot “because we want to have exposure to that price upside, just like we do with that government we sell."

Emissions reduction enabler

An Environmental Protection Agency study shows the oil and gas sector saw a 6.4% decrease in emissions from 2019 to 2024, which Faraca said is driven primarily by using natural gas and LNG to displace coal-fired power generation.

TC Energy has about 9 gigawatts of electricity retiring from coal and being converted to natural gas across its portfolio and along its pipelines, she said.

“One thing we are doing on our systems is we’re changing how we operate. Instead of allowing venting, we’re pumping that down, pulling it through compression and putting it back in the pipe,” Faraca said. 

For Cheniere, Feygin said the company is actively unveiling climate principles and setting emissions reductions targets.

“Every cargo that we export comes with its emissions profile and the cargo emissions pack,” he said.

Cheniere along with ConocoPhillips have joined the Oil & Gas Methane Partnership 2.0, allowing the companies to achieve Gold Standard as a result of setting its Scope 1 annual methane intensity target at its liquefaction sites, Feygin said.

“LNG is very much a pragmatic solution in terms of replacing coal,” O’Brien said.

But on the other hand, “when it comes to LNG, you’re tracking the cargoes and the emissions of the cargoes, but nobody is actually willing to pay more for lower emissions cargoes,” O’Brien stated.

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