ConocoPhillips aims to ingrain itself into the global LNG ecosystem, from shale gas output at the wellhead to liquefaction to shipping to regasification in Europe and Asia, CEO Ryan Lance said. (Source: Shutterstock)
U.S. LNG exports have a “substantial” growth runway ahead, says ConocoPhillips Chairman and CEO Ryan Lance.
ConocoPhillips anticipates U.S. LNG export volumes to effectively double from their current level of around 12 Bcf/d to 13 Bcf/d, based on the projects that are permitted or already in development.
That doesn’t mean there aren’t barriers to overcome. Natural gas prices remain weak and the White House’ policy decisions have cast a pall over U.S. LNG at home and abroad.
Henry Hub spot prices averaged $1.98/MMBtu in August, down 23% from the same period a year ago, according to U.S. Energy Information Administration figures.
Higher natural gas prices will be needed to support long-term development in major U.S. shale gas fields, Lance said Sept. 17 at the Gastech Houston 2024 conference.
“I think what people are going to find is the consumer is not going to pay a lot more for their gas because of the abundance of supply that’s out there,” Lance said. “But price probably has to come up to incentivize rigs to keep going in the Haynesville, the Marcellus and other places.”
U.S. dry gas producers are contending with lower-than-expected demand and an oversupplied market, fueled by record volumes of associated gas output from the Permian Basin.
“Enough associated gas is coming out of the Permian that you can withstand the extra demand coming from LNG exports,” Lance said, “and from any power demand that comes from generative AI.”
Lance criticized the Biden administration’s pause on permitting new liquefaction projects as yet another factor complicating the build-out of U.S. LNG exports.
Political and regulatory uncertainty in the U.S. might lead would-be customers to sign long-term purchase agreements with LNG producers in Qatar or Australia instead, he said.
“Most of the market understands the stability of the U.S. system—ultimately, we can figure these things out,” Lance said. “But it does create some uncertainty in their eyes.”
Those sentiments were echoed at Gastech by Chevron CEO Mike Wirth, who criticized President Joe Biden for vilifying natural gas and playing politics with LNG permits.
“The [Biden] administration's LNG permitting pause elevates politics over progress,” Wirth said in a keynote address. “The DOE’s own findings show that on a lifecycle basis, U.S. LNG can deliver substantial greenhouse-gas reductions compared to coal in both Europe and Asia.”
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Wellhead to water
ConocoPhillips sees a myriad of ways to capitalize on the global LNG value chain, from U.S. shale gas production to liquefaction and shipping to regasification in Asian and European markets.
ConocoPhillips is adding major shale scale through a blockbuster combination with Marathon Oil, a deal that will bring together two of the largest producers in the Eagle Ford, the Bakken and the Permian Basin.
Marathon shareholders signed off on the $17.1 billion transaction this summer, but the deal is facing antitrust scrutiny from the U.S. Federal Trade Commission. ConocoPhillips expects the Marathon acquisition to close late in the fourth quarter.
“[The Marathon deal is] an opportunity to really improve the company over the next couple of decades,” Lance said. “It’s a pure synergy play for us.”
Houston-based ConocoPhillips is also building out its playbook on the liquefaction and export side of the equation.
Last year, ConocoPhillips acquired a 30% stake in the Port Arthur LNG project on the U.S. Gulf Coast and contracted 5 million tonnes per annum (mtpa) of offtake capacity.
The company also signed on with 2.4 mtpa of offtake capacity with LNG export projects on the west coast of Mexico: 2.2 mtpa at the Saguaro LNG project and 0.2 mtpa with Energia Costa Azul Phase 1.
ConocoPhillips already owns interests in producing LNG facilities in Qatar and Australia, which sell to customers under long-term contracts.
The company’s LNG marketing efforts aim to place its offtake volumes into European and Asian markets, according to ConocoPhillips investor filings.
Last year, ConocoPhillips signed regasification capacity and services agreements for approximately 1.7 mtpa of offtake volumes through the Gate LNG terminal in the Netherlands.
“We’d like to double [the LNG] business inside of our portfolio going forward,” Lance said. “But you’ve got to be in the full value chain.”
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