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U.S. LNG capacity could double in the next decade

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Investment firms signal future growth in Haynesville with

new

funds

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Operators cautious due to past price volatility and high

breakeven costs

By Sheila Dang, Georgina McCartney and Arathy Somasekhar

HOUSTON, March 28 (Reuters) - U.S. natural gas producers

and investment firms are gearing up for more activity in

Louisiana's Haynesville shale basin, positioning themselves for

a boom in liquefied natural gas exports boosted by new approvals

from President Donald Trump.

Gas prices are rising as LNG producers in the United States,

already the world's largest LNG exporter, bring new projects

online in Texas and Louisiana. U.S. gas demand is expected to

hit record highs in 2025 and 2026.

Energy companies are planning and building big-ticket LNG

projects that will require even more growth in domestic supply

in the coming decade after Trump reversed a moratorium on new

projects in the first days of his administration.

That is prompting energy producers to look again at gas

plays that may help supply these future U.S. LNG plants.

Haynesville's location in east Texas and northwest Louisiana

is ideal for exports from LNG facilities and projects clustered

on the nearby Gulf Coast.

Gas from Haynesville is easier to convert to LNG because it

has fewer impurities that hinder liquefaction, such as nitrogen

and hydrogen sulfide, said Gordon Huddleston, president of

Aethon Energy, one of the largest gas producers in the basin.

Aethon is exploring an IPO or asset sales, given demand for its

product.

"I think everyone is really going to jump back into the

Haynesville," said George Whittington, managing partner at

Proven Resources, who told Reuters last week the energy

investment firm is raising a $25 million fund to acquire mineral

and royalty rights in the basin.

Momentum Minerals also told Reuters on Monday the mineral

rights and royalties company is raising a fourth fund with

partner Apollo Global Management to buy more rights in

Haynesville and in the Permian, the top U.S. oilfield.

Such moves by investment firms are often an early signal of

future growth, and the rising expectations for Haynesville were

shared by several energy companies in quarterly earnings calls,

including the largest U.S. gas producer, Expand Energy ( EXE ),

as well as smaller producer Comstock Resources ( CRK ) and

oilfield service firm, KLX Energy Services Holdings ( KLXE ).

Murray Auchincloss, CEO of UK oil major BP, which

holds more than half a million acres in the basin, proclaimed

"the time has come for the Haynesville" at a conference in

Houston earlier this month.

Japan's Tokyo Gas ( TKGSF ), an example of international

interest, has been an active buyer of Haynesville assets in the

last two years as Japan's biggest city gas provider seeks to

mitigate disruption to its supplies caused by sanctions on

Russia following Moscow's invasion of Ukraine. It plans to spend

at least $1.9 billion on its U.S. shale business between 2026

and 2029.

'A LITTLE GUN SHY'

Haynesville gas production is about half that of the

prolific Permian Basin in Texas and New Mexico, but is expected

to grow at a faster rate, according to government forecasts.

Operators say they will move more carefully than in the past

to avoid a bust. They also face challenges, starting with the

time and cost of drilling the deeper wells the Haynesville basin

requires.

"Producers are nervous about getting in front of demand

again, because they did it last year, and it was painful,"

Huddleston said, referring to a warm winter in the U.S. in 2023

that drove down gas prices.

"Everyone's a little gun shy."

The breakeven price for new production in Haynesville is

roughly $3.75 per million British thermal units (mmBtu), said

David Seduski, head of North American natural gas at Energy

Aspects, although it varies within the basin.

In contrast, the breakeven in the Marcellus shale field,

which covers Pennsylvania, West Virginia and Ohio, is around

$2.15.

Gas futures will need to stabilize around $5.00

through 2027 before large gas producers have an incentive to

ramp up production, said Kevin MacCurdy, managing director at

Pickering Energy Partners.

Analysts predict prices will be lower than $5.00 in the

coming years, but LNG export demand could change the equation,

given higher prices abroad. Gas was trading around $13 per mmBtu

at both the Dutch Title Transfer Facility benchmark

in Europe and the Japan Korea Marker benchmark in Asia.

James Elder, CEO of Momentum Minerals, said in the past few

years his firm bought mineral and royalty rights in parts of the

Haynesville that were not yet producing gas because prices were

low. Now, the firm is hoping producers will drill prudently as

prices rise.

"Our hopes are that operators have learned their lesson and

won't get ahead of their skis," he said.