Chesapeake Pushes to Move 10% of US Shale Gas into Asian Markets

Chesapeake Energy is targeting getting 10% to 15% of its production onto an international index, the company’s Executive LNG Adviser Katrina Kaufman said Sept. 16 during the Asia-US LNG Roundtable.

Pietro D

Pitts

Hart Energy

Tue, 09/17/2024 - 04:29 PM

Chesapeake Remains Bullish on LNG, Eyes Asian Markets

Many U.S. shale gas producers, such as Chesapeake and ConocoPhillips, are considering the LNG space as an outlet for their production. (Source: Shutterstock/ Chesapeake Energy)

Chesapeake Energy, whose merger with fellow U.S. E&P Southwestern Energy remains under review, is already looking overseas for its next move.

The Oklahoma City-based company wants to send its natural gas, via LNG, into what it sees as a robust growth market in Asia, despite some political unknowns in the U.S.

Company executives also remain bullish that the E&P can get at least a 10th, and possibly more, of its production out of the U.S. and onto the international market.

“We are targeting currently 10% to 15% of our production to be based off of an international index,” said Katrina Kaufman, Chesapeake's executive LNG adviser, during a Sept. 16 Asia-U.S. LNG Roundtable event held near downtown Houston.

Chesapeake’s production is concentrated in the Haynesville and Marcellus shales. The company sold its oily Eagle Ford Shale position last year.

In the Haynesville, Chesapeake produces more than 2.3 Bcf/d, Kaufman said. There, she said the company has a deep inventory that could support 15-year to 20-year LNG deals.

“We're actively seeking to provide production into the [U.S.] LNG facilities to sell free-on-board (FOB) or otherwise,” Kaufman said. She did not give a timeline for Chesapeake’s production ambitions.

In 2023, the U.S. rose to become the world’s largest LNG producer, surpassing Australia and Qatar, according to the International Gas Union (IGU). The U.S.’ rise was aided by Russia’s invasion of Ukraine and a subsequent decline in Russian energy flows to Europe, which gave the U.S. an opportunity to boost its LNG exports to Europe and the rest of the world.

Many U.S. shale gas producers, such as Chesapeake and ConocoPhillips, are considering the LNG space as an outlet for their production. The U.S. exported 13.4 Bcf/d for the week ending Sept. 11. This compares to 12.4 Bcf/d during the same weekly period in 2023, according to the U.S. Energy Information Administration (EIA).

However, a pause on new U.S. LNG export approvals announced in early 2024 by U.S. President Joe Biden has brought uncertainties for U.S. gas producers and U.S. LNG exporters across the board.

Political uncertainties

Despite short-term pricing in the U.S. LNG exporting space and the ongoing Biden pause, Asia and the Asia Pacific region will be key growth markets for U.S. LNG exporters going forward.

“The number of strategic objectives that LNG addresses for the U.S. is enormous,” Baker Hughes Government Affairs & Public Policy Vice President Matt Armstrong said during the event.

LNG exporters will want to capitalize on LNG’s potential, even if the government has policies in place that “I might argue currently borders on incoherence,” Armstrong said.

“The U.S. is trying to: keep incremental Russian and Iranian gas off the market; grow strategic integration between the U.S. and Asian partners; address climate change; and also boost cheap reliable energy to meet undeniable growth in global electricity demand,” Armstrong said.

Armstrong claimed that the U.S.’ strategy was counterproductive and “choked back both domestic production of the underlying resource and the avenues for that resource to hit the global market.”

But a “return to reason” is probably in the near future, Armstrong said, as the government moves away from election year politics that stunted negotiations, contracts and investments.

LNG executives seemed to share the same sentiments.

Companies moving forward with U.S. LNG export projects—such as Commonwealth LNG and Texas LNG—remain bullish on the U.S.’ future as an LNG exporter.

“I think that as you look at the United States, certainly it has been a very stable area to develop infrastructure in the past,” Commonwealth LNG Executive Vice President Daniel McGinnis said during the event.

Though “energy infrastructure is under pressure right now,” McGinnis has taken a positive outlook, calling the pause “a political move” where “substance behind it will emerge in our favor over time.”

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Pietro D Pitts

International Managing Editor. Previous work: Bloomberg Venezuela, LatinPetroleum Magazine and Banco Santiago de Leon in Caracas; Energy Intelligence, Jefferies, and Morgan Keegan in Houston; Banco Mercantil del Norte (Banorte) in Mexico City. Degrees: Finance (University of Houston). Languages: English and Spanish fluency, Portuguese understanding.