While U.S. natural gas producers are working to balance production with the limited commodity price upside to the end of the year, DT Midstream Inc. (DTM) is expecting Gulf Coast LNG demand to drive a bevy of expansion projects through the decade.
The Detroit-based gas infrastructure firm has committed $265-295 million for growth projects this year, including for additional phases of its Louisiana Energy Access Project (LEAP) pipeline project and an expansion of the Blue Union gathering system in the Haynesville Shale. Altogether, the company could sanction as much as $375 million worth of projects this year.
Fueling its aggressive buildout in Louisiana and Appalachia is a coming spike in natural gas prices because of the liquefied natural gas ramp up on the Gulf Coast starting next year, CEO David Slater said. The expected increase “reflects the new LNG demand and will support production growth on our assets as we close in on 2025.”
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DTM is forecasting prices in 2025-2026 to average $3.50-4.00/MMBtu as feed gas demand from the Gulf Coast projects, like Plaquemines LNG and Golden Pass LNG, open more outlets for the current supply glut.
NGI’s Henry Hub forward fixed price for the summer 2024 balance stood at $2.235, compared with $3.351 for summer 2025.
Slater added there is a “potential for an earlier response if hot summer weather increases a call on natural gas for power demand.” DTM also is monitoring the potential increase of gas demand from the power sector as utilities respond to the growth of artificial intelligence (AI) and data centers.
A ‘LEAP’ Forward
Up to 10.7 Bcf/d of LNG export capacity is expected to come online in North America by the end of the decade, according to NGI’s LNG Export Project Tracker. The majority is centered near DTM’s existing assets on the Gulf Coast.
In preparation for the added demand, DTM has been progressing LEAP expansion projects to increase the output from its Haynesville gathering systems to the Gillis Hub. The 150-mile, 36-inch diameter pipeline carries Haynesville gas in Louisiana to the Gulf Coast for exports and industrial use.
The Gillis Access project was placed in service earlier in the year. The third phase is ahead of a targeted completion for the end of September. Once the third phase is completed, LEAP’s capacity would be 1.9 Bcf/d.
In the meantime, however, major natural gas producers including EQT Corp. and Chesapeake Energy Corp. have been pulling back volumes as prices continue to dip below the $2 mark. In April, Norway’s Equinor ASA reported that the size of those cuts could create a thin supply balance when U.S. LNG capacity expands starting next year.
“While Haynesville producers have acted rationally to respond to short-term prices, there is strong recognition of the coming demand starting next year, and the long-term need for production access to the Gulf Coast markets,” Slater said.
Haynesville throughput on the Blue Union gathering system declined slightly to 1.52 in 1Q2024 from 1.56 Bcf/d in 4Q2023. It was a 0.11 Bcf/d reduction compared with 1Q2023
Ohio Players
Meanwhile, throughput on its Northeast systems ticked up slightly to 1.54 Bcf/d in 1Q2024. The .01 Bcf/d increase over 42023 was attributed to the start of the Ohio Utica gathering system in March and sustained volumes from Appalchian producers. Throughput was 1.36 Bcf/d in 1Q2023.
“The liquids-rich Ohio Utica resource play is highly economic in today’s price environment and further diversifies our gathering segment,” Slater said. “We expect this emerging basin to continue to grow, and are observing increased drilling activity from both our anchor customer, as well as other producers in the region.”
DTM also disclosed it is planning an expansion of its Stonewall gathering system in northern West Virginia and southwestern Pennsylvania, as well as an interconnect to the Mountain Valley Pipeline system.
The project, Slater said, would “provide a new production outlet to the Mid-Atlantic market, which we expect will become a fast-growing region with new data centers and AI-powered demand load emerging.”
DTM also upsized the capacity of its Appalachia Gathering System Phase III expansion, which is targeted for completion sometime between mid-2025 and 2026.
DTM reported 1Q2024 net income of $97 million (99 cents/share), up from $81 million (84 cents) in the same period last year.
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