U.S. pipeline natural gas exports are tightening local supply, but Cheniere’s portfolio management limits downside risks

Natural gas exports to Mexico in 2020 have offered a lifeline to a U.S. natural gas industry struggling with COVID-19 and falling LNG exports. Eagle Ford and Permian producers have benefitted from this trend, given their proximity to Mexico. What’s going to happen to South Texas (STX) price benchmarks when we return to more normal times (knock on wood) and LNG exports ramp up again? Clearly, STX prices will be supported by greater pipeline natural gas and LNG exports – but the effects on Cheniere’s Corpus Christi LNG terminal could be limited, as the facility has relatively little exposure to STX benchmarks despite located in South Texas.

Growing pipeline exports to Mexico

Our analysis of South Texas (which we define as spanning from Brownsville from Eagle Pass) shows that STX cross-border flows rose from just under 0.4 Bcf/d in 2010 to nearly 2 Bcf/d by 2019, the last full year of data from the U.S. Energy Information Administration. We believe STX exports now stand at all-time records.