Toby Rice: EQT has Considered Developing Its Own East Coast LNG Project

Natural gas producer EQT Corp. continues to search for ways to gain LNG takeaway. Leaving no options off the table, EQT President and CEO Toby Rice confirmed to Hart Energy that the company has even considered developing its own LNG export project on the East Coast.

"It’s something that we’re looking at," Rice said, adding, “There are a lot of things that need to take place but we are exploring it because the prize is so massive. East Coast LNG would be transformative, not only to EQT, but to the United States and the rest of the world.”

The Pittsburgh-based company continues to have discussions with LNG operators along the Gulf Coast. But Rice wants East Coast accessibility, and during an April 2022 earnings call, Rice said the company was “contemplating equity investment opportunities in LNG export facilities” without specifying their locations.

EQT, the largest natural gas producer in the U.S., transports around a quarter of its gas volumes from the Marcellus and Utica shale, or around 1 Bcf/d, to buyers on the Gulf Coast.

“We’re working to convert that capacity we have to the Gulf Coast to international exposure by talking to some of the LNG facilities down there,” Rice said.

EQT has opportunities to lock in contracts with three to four different LNG facilities needing gas supply, CFO David Khani said on a call with analysts last summer.

Other U.S. shale gas producers, such as Chesapeake Energy Corp., Devon Energy Corp. and EOG Resources Inc., have signed gas supply agreements with exposure to international LNG markets.

Chesapeake recently inked an agreement with commodities trading house Gunvor Group Ltd. to supply up to 2 million tonnes per annum of LNG sourced from over a 15-year period. The agreement moves Chesapeake closer to receiving premium international pricing for its Haynesville Shale gas.

The Appalachian gas producer is also considering opportunities to bring additional LNG exports closer to home along the East Coast.

Two LNG export terminals operate on the East Coast: Elba Island in Georgia and Cove Point in Maryland. But bringing new East Coast LNG projects would create new demand for gas produced from EQT’s footprint in the Marcellus and Utica plays.

Rice said he was encouraged by his appointment to the Philadelphia LNG Export Task Force, an effort established last year by the Pennsylvania General Assembly to explore ways to turn the Port of Philadelphia into an LNG export terminal.

 “A lot of things need to line up, but EQT and myself are in the room,” Rice said. “We will be looking for ways to connect the dots and set the table for a potential East Coast LNG project.”

RELATED: US Gas Exports Primed to Soar, but Constrained Appalachia Can’t Meet the Moment

Permitting reform ‘inevitable’

The Appalachian Basin has been plagued by takeaway constraints, with the region experiencing periods when gas production exceeds local takeaway capacity.

More gas production can’t come online until takeaway capacity is boosted, and the region has been unable to get new midstream projects over regulatory hurdles in the Northeast for several years.

EQT has access to around 3.6 Bcf/d of pipeline takeaway capacity, according to regulatory filings. The company is also committed to another 1.29 Bcf/d of capacity on the Mountain Valley Pipeline, a project that has seen several permitting delays.

But Rice said he’s optimistic about lawmakers taking action on reforming the permitting process for energy infrastructure, including pipelines.

“It’s inevitable,” Rice said. “It’s also recognized as being incredibly important, and it’s top of mind.”

After an effort led by Sen. Joe Manchin (D-W. Va.) to pass permit reform legislation failed in 2022, House Republicans have rekindled the effort with another proposal aimed at hastening the infrastructure permitting process.

Speaking during the CERAWeek by S&P Global conference on March 8, U.S. Energy Secretary Jennifer Granholm acknowledged the need to speed up permitting timelines for energy infrastructure projects.

“It should not take over a decade to get permitting for a transmission project on federal lands,” Granholm said.

RELATED: EQT’s Q4 Earnings Up, But Natural Gas Price Volatility Clouds Forecast

Price collapse, pipeline constraints affect production outlook

After averaging $6.42/MMBtu during 2022, Henry Hub natural gas prices have collapsed more than 60% to $2.44/MMBtu.

Henry Hub prices are expected to average about $3/MMBtu this year before rising to an average $3.89/MMBtu in 2024, according to the latest estimates from the U.S. Energy Information Administration.

EQT plans to keep production between 1.9 Tcfe and 2 Tcfe this year, roughly flat compared to the company’s 2022 production of 1.94 Tcfe. The company anticipated producing between 425 Bcfe and 475 Bcfe during the first quarter.

“The low end of our guidance range contemplates a scenario where we slow our production cadence for the year, should natural gas prices continue to deteriorate,” Rice said on EQT’s fourth-quarter earnings call in February.

Rice said another factor impacting EQT’s ability to ramp up gas production is the lack of adequate pipeline infrastructure.

“You’ve got an operator that’s extremely sustainable and profitable and we cannot grow production despite historic gas demand needs?” Rice said. “That’s a sign that the market is broken.”