U.S. LNG Export Capacity Continues to Grow, Benefitting Midstream

Growth opportunities in the midstream space have largely been focused on natural gas and natural gas liquids.

The U.S. became the world’s largest liquefied natural gas (LNG) exporter last year, but the space is continuing to grow at a fast pace following Russia’s invasion of Ukraine. Two projects — Golden Pass train 1 and Plaquemines phase 1 — should come online next year, growing export capacity considerably.

In total, not including projects that are under development, peak U.S. LNG export capacity will increase in coming years to over 24 billion cubic feet per day (Bcf/D). To compare, the current level is at 13.8 Bcf/d.

“For context, U.S. natural gas production was recently at 111 Bcf/d. So this is really significant in terms of kind of the growth that we see,” Stacey Morris, head of energy research at VettaFi, said during a livecast on July 10.

See more: “Energy Infrastructure Beyond Natural Gas: LNG and NGLs”

Where LNG Export Capacity Is Growing

There is more potential upside to these figures if the projects under development continue to progress and reach construction. Currently, Morris said, Cheniere is working on an expansion at Sabine Pass. Meanwhile, Venture Global is working on a project called CP2 LNG. Furthermore, Delfin Midstream is working on two floating LNG vessels.

“I think what’s also really interesting here is that we’re still seeing customers from  Asia and Europe sign agreements to buy LNG for 20 years,” Morris said.

Morris said that this is important to consider for earlier stage projects, as it highlights the long-term demand for natural gas. Some projects that are starting up in 2027 to 2028 will have contracts going into 2048 for LNG volumes. Midstream contracts by nature are long-term, offering visibility to cash flow.

“More natural gas production in the U.S. means more volumes for these companies to gather, to process, and to transport to different places,” Morris said. “At a high level, more exports means more production, which means more volumes for midstream, and more opportunities for [midstream companies] to make fees.”

See more: “U.S. LNG Projects Advance Even as Global Prices Slump”

How Midstream Companies Benefit From Growing U.S. LNG Export Capacity

There are a lot of different ways that midstream companies can benefit from the growth in U.S. LNG export capacity.

Liquefaction-focused names include Cheniere (LNG), Cheniere Energy Partners (CQP), and NextDecade (NEXT). Currently, Cheniere and Cheniere Energy Partners are the only public liquefaction companies with operating LNG facilities, Morris said.

Also operating in the space are the larger, diversified midstream names that own interests in LNG export facilities. This includes Enbridge (ENB) and Kinder Morgan (KMI).

In a show of confidence for the LNG export business model, Berkshire Hathaway Energy on Monday announced that it would purchase Dominion Energy’s 50% limited partnership stake in Cove Point LNG. The $3.3 billion deal will take Berkshire Hathaway’s interest to 75%.

Additionally, there are several midstream names that help supply LNG facilities. These companies may be operating pipelines that go directly to the LNG export facility. Conversely, they may be operating the pipelines that transport natural gas from a producing region to a major hub. Then, a different pipeline takes that final leg into the facility. Companies that have exposure to this include Enbridge (ENB), Kinder Morgan (KMI), TC Energy (TRP), Enterprise Products Partners (EPD), and DT Midstream (DTM).

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How to Get Exposure to Opportunities in the Midstream Space

Several of the above names are included in the Alerian Midstream Energy Select Index (AMEI), which can be accessed with the Alerian Energy Infrastructure ETF (ENFR).

ENFR’s underlying index includes corporations and MLPs, engaged in the pipeline transportation, storage, and processing of energy commodities. 

In the upcoming livecast on August 9, “How the US Energy Outlook Benefits Midstream/MLPs,” SS&C ALPS Advisors and VettaFi will discuss oil and gas fundamentals and alternative energy incentives that may benefit the midstream space.

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

vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for AMLP and ENFR, for which it receives an index licensing fee. However, AMLP and ENFR are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of AMLP and ENFR.