Calcasieu Pass LNG export terminal gets final federal authorization ahead of construction

Highlights

DOE approval allows shipments to non-FTA countries

Status of final investment decision and financing unclear

Houston — Venture Global LNG's proposed Calcasieu Pass export terminal received US Department of Energy approval Tuesday to ship cargoes to countries with which the US does not have free-trade agreements.

While the developer has a contractor, long-term offtake agreements with shippers covering the bulk of its capacity, and plenty of market momentum, it has not yet publicly announced a positive final investment decision, which generally comes before full construction begins. The status of financing arrangements to pay for the billions of dollars in costs also has not been disclosed. A spokeswoman did not respond to messages seeking comment.

The company has been the most active among developers of second wave US projects in securing commercial agreements for the LNG it plans to produce, and it has said previously that it wanted to be able to make an FID and begin construction as soon as possible so it can be up and running by the early 2020s to help meet the forecast global demand during that timeframe.

When the Federal Energy Regulatory Commission announced last month that it had approved Venture Global's permit certificate for Calcasieu Pass in Cameron Parish, the developer said in a statement that it planned to "immediately commence construction activities" in coordination with regulatory agencies. Tuesday's company statement following the DOE authorization to export up to 1.7 Bcf/d of LNG to non-FTA countries said only that it was looking to "commence site works imminently," in line with an implementation plan it filed with FERC.

When Venture Global announced that Kiewit had been awarded the engineering, procurement, and construction contract for Calcasieu Pass, it did not disclose how much it had agreed to pay. It also has not disclosed how much offtakers Royal Dutch Shell, Italy's Edison, Portugal's Galp, Britain's BP, Spain's Repsol and Poland's PGNiG have agreed to pay for the LNG that the terminal will produce. Though questions remain, the extensive experience those counterparties have in the global LNG market provides a level of support for project financing.

Besides Calcasieu Pass, Venture Global LNG is also proposing to build a 20 million mt/year export terminal in Plaquemines Parish, south of New Orleans. The company continues its efforts to sign contracts to commercialize that project.

The US is poised to become a much bigger player in the global supply of LNG, with the number of domestic liquefaction terminals in operation expected to double by the end of 2019. Price volatility, international trade tensions and the outcome of commercial efforts continue to create a level of uncertainty for the next wave of export projects.

-- Harry Weber, Harry.Weber@spglobal.com

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Feds give Kinder Morgan permission to introduce feed gas at Elba Island LNG

 Sergio Chapa , Houston Chronicle March 6, 2019 Updated: March 6, 2019 9:38 a.m.

Houston pipeline operator Kinder Morgan is one step closer to placing its $2 billion Elba Island LNG export terminal in Savannah, Ga., into service.

In a Wednesday morning order, the Federal Energy Regulatory Commission gave Kinder Morgan permission to start introducing feed gas into the first of 10 production units being built at the liquefied natural gas plant.

Kinder Morgan began the weeks- to months-long startup process for the liquefaction plant in early February. Being able to introduce feed gas is another step towards being the facility into commercial service.

Once all 10 production units are operational, the facility will be able to produce up to 2.5 million metric tons of LNG a year.

Elba Island LNG is being developed as a joint venture of Kinder Morgan and EIG Global Energy Partners, a private equity firm based in Washington, D.C.

Originally built as a facility to import natural gas, record production in U.S. shale basins prompted Kinder Morgan to seek permission from the federal government to reconfigure part of the facility into an export terminal that will include 10 production terminals, known as trains.

The company received a permit to build the export terminal in June 2016. The first of the 10 trains is expected to be fully operational and capable of producing exports by the end of the first quarter.

Excerpt:

U.S. demand for LNG feedgas has picked up in recent weeks, posting a record high of 5.6 Bcf/d in late February and averaging more than 5 Bcf/d in March to date, as Cheniere Energy completed the fifth train at Sabine Pass and the first at Corpus Christi. That level is nearly 1 Bcf/d higher than last month and nearly double what it was at this time last year. But it's just the start. Train 2 at Corpus Christi was approved for feedgas just yesterday and Kinder Morgan's Elba Island project in Georgia just days before that. With about 30 MMtpa, or ~4.5 Bcf/d, of liquefaction and export capacity due online this year, feedgas deliveries are poised to surpass 9 Bcf/d by the end of the year, with nearly all of that incremental demand coming online along the Texas and Louisiana Gulf Coast. The pace of this demand growth over the course of the year will come down to how quickly the anticipated trains can complete construction and testing, the timing of which can depend on a whole host of factors, including the extent of the repairs or modifications that are needed along the way, the timing of regulatory approvals, or the timing of gas pipeline connections to supply the facilities.

-RBN Energy

U.S. LNG Exports: The Who, What, Where Of Projects And Why China Relations Matter

Mar. 13, 2019 8:00 AM ET  seekingalpha.com

 

Summary

  • Multiple LNG export projects in the US are slated to come online this year and next, adding an incremental ~6.5 Bcf/d of export capacity.
  • Other projects have recently green lighted construction or are nearing the start of construction, giving visibility to capacity additions in the 2022-2024 time frame.
  • A US-China trade deal could be beneficial for inking purchase agreements with Chinese customers as uncertainty is alleviated.

While growing exports of US oil is a positive trend for energy companies, including midstream, it is seldom a topic of conversation in investor interactions. On the other hand, liquefied natural gas (LNG) exports come up frequently in conversation. How much LNG is the US exporting today? How much is that going to grow? What's going on with that one LNG project on the coast of [insert state here]?

Today, we revisit US LNG exports to provide a status update on projects that are expected to start up this year and facilities that have recently been greenlighted to start construction, as well as pipeline projects that will supply these export terminals. We also discuss projects that are likely approaching a final investment decision (FID) this year. Lastly, we discuss US-China trade relations as it relates to US LNG exports. For a broader discussion of US LNG exports and the benefit of exports for midstream, please see our white paper from July 2018. For those wanting a sentence summary, LNG exports benefit midstream broadly by supporting growing natural gas production (through access to global demand), and these growing volumes require more energy infrastructure such as pipelines and natural gas processing facilities.

US LNG export capacity poised to jump

US LNG export capacity is set to jump this year and next as multiple projects gradually come online. Projects on deck include Cheniere's (NYSEMKT:LNG) Corpus Christi, Kinder Morgan's (NYSE:KMI) Elba Island, Sempra Energy's (NYSE:SRE) Cameron LNG, and Freeport LNG as shown in the chart below. The only export projects operating in 2018 were Cheniere's Sabine Pass facility in Louisiana and Dominion's (NYSE:D) Cove Point project in Maryland. Combined, these projects have a nameplate capacity of ~3.5 Billion Cubic Feet per day (Bcf/d).

Three recent FIDs with many more waiting in the wings

Three projects in the US and Canada have recently announced final investment decisions (FID)1, paving the way for construction to begin. In October, a joint venture led by Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) announced FID for LNG Canada2. TransCanada (NYSE:TRP) will build the 2.1 Bcf/d Coastal GasLink Pipeline with a 25-year agreement to transport gas to the facility. Shifting to the Gulf Coast, Exxon Mobil (NYSE:XOM) and Qatar Petroleum announced plans last month to move forward with Golden Pass LNG. Golden Pass will be the cornerstone shipper for Enable Midstream's (NYSE:ENBL) Gulf Run Pipeline with a 20-year commitment of 1.1 Bcf/d. Venture Global also announced last month that it would commence construction on the Calcasieu Pass Project. The company is also constructing the associated TransCameron Pipeline to supply the export facility.

Several projects may be knocking on the door in terms of reaching final investment decision. Specifically, Tellurian's (NASDAQ:TELL) Driftwood LNG project received the final Environmental Impact Statement (EIS) from the FERC on January 18. TELL expects to reach FID and begin construction in the first half of this year. SRE announced that its Port Arthur LNG project received the final EIS from the FERC on January 31. SRE's LNG projects are expected to be a featured topic at the company's analyst conference later this month.

Three LNG export projects expect to receive a final EIS in 2Q19, which would bring the projects closer to potential FID this year. These include NextDecade's (NASDAQ:NEXT) Rio Grande project, Venture Global's Plaquemines facility, and Annova LNG's Brownsville project. All three projects are expected to reach FID in 2H19 based on company commentary.

Other projects have received FERC approval but have not reached FID. A key priority for Cheniere in 2019 is reaching FID for Train 6 at Sabine Pass. On their recent earnings call, the management of Energy Transfer (NYSE:ET) was targeting FID for Lake Charles LNG in 1H20. Magnolia LNG has received FERC approval and is construction-ready but has not proceeded to FID. The map below shows the projects discussed above. Please note that this is not an exhaustive list of approved and proposed projects in the US, which are listed on the FERC's website in the preceding links.

What about the impact of US-China trade relations on LNG exports?

Unsurprisingly, US LNG exports to China have tapered given the broader trade dispute and resulting 10% tariffs on US LNG. Exports to China fell from a peak of 25 Bcf in October 2017 to zero in September 2018. Volumes recovered in 4Q18 but were less than 10 Bcf per month. US-China trade relations have not slowed the overall growth in US LNG exports, which grew to a record-high 123 Bcf in December 2018. That said, the primary concern with the US-China trade dispute had been that US LNG project FIDs would be delayed by the inability of Chinese companies to sign purchase agreements amidst the ongoing uncertainty.

Media reports in recent days have indicated that the US and China are on the verge of reaching a deal. The Wall Street Journal reported that a trade deal would include an agreement for China Petroleum & Chemical Corporation (Sinopec) to purchase LNG from Cheniere under a long-term agreement. According to a Reuters article citing Sinopec's President, the company will proceed with agreements to purchase US LNG as soon as the Chinese government directs it to do so. If a deal can be reached, it would be beneficial for US LNG export projects. Obviously, there's a global market for LNG, with the US exporting to more than 30 different countries last year. However, China is the second-largest purchaser of LNG (after Japan), and undoubtedly, parties in both China and the US would like to see a robust LNG trade from the US to China.

Bottom Line

It's a dynamic time for US LNG exports as a wave of new capacity is brought online this year and into 2020, while the next wave of capacity reaches final investment decision. An improvement in US-China trade relations may further catalyze near-term FID announcements for projects waiting in the wings.

China's military is acting fool and spouting threats, which could start a was, not to mention jeopardize LNG import from the U.S. Premier Zee meanwhile is trying to hold down civil unrest, fearing that if the Chinese economy drops off too much, the government will loose control. Remember the Czars.

"When the people have the power, they have the right"--Abraham Lincoln

If you look at the annual demand, LNG export is about to be on par with the volume injected into storage.   Of course, it's a more consistent demand than winter heating, so it shows up more as a floor to natural gas prices.   Anyone receiving a check for royalties on national gas should be happy to see the export market expand.  

Thanks, dbob.  That's a good way to characterize the looming increase in export.  I do hope the "floor" is above $3/mcf!

A great number of us out here in Oregon really wish the LPG Terminals would be built at the Terminus point in Astoria on the Columbia. Just looking at the additional employment would be a fantastic boon to the Port and Townships economy. Add the additional revenue that would be generated by additional deep water ships with their crews would bring in would just be gravy on the old potatoes for everyone. This would also eliminate the need to be moving LPG by Rail, which is a huge concern for the Tree hugging Environmentalist of the United States that do not want anything moved through the Columbia River Gorge by Rail. An West Coast Astoria Terminal would be a win for LPG as it would provide a convenient jump off point to China and other Pacific Ports. 

Unfortunately we are also home to the City of Portland (got to keep Portland Weird) and its Liberal Socialist base mixed with our normal West Coast 'heads up their butts' Political Groups in Olympia, Salem and Sacramento pushing their Liberal Socialist Agendas while taxing their People to death while giving out care and feeding to every low life Freeloader that comes into the State(s).

Too bad we cannot get Federal intervention and just have them condemn for Public Domain and push the pipeline and terminal through anyway for the "Good of the American People". Too bad the same 'People' that shut down our Logging are still in power and running the 'dog and pony show' out here!

Hope to hear a lot more good things out of Texas and Louisiana about LPG and our future.

Bill, I feel sure you meant LNG, instead of LPG.  LPG is propane, a NGL (natural gas liquid).  Not liquified natural gas (LNG).  The difference is considerable.

LPG:  Liquefied petroleum gas or liquid petroleum gas (LPG or LP gas), also referred to as simply propane or butane, are flammable mixtures of hydrocarbon gases used as fuel in heating appliances, cooking equipment, and vehicles. 

Sorry about that... LNG is what I meant... LPG is what some of the Activist are trying to get banned in the Gas Stations and RV parks right now because it "might" decide to blow up at any time. They also want to ban LNG and Gasoline for the same reason... along with anything else that is or might move via Rail, Truck, Pipeline or Storage facility as they might explode on their own at any time as well. Thanks

LNG industry eyes natural gas being flared in the Permian Basin

By Sergio Chapa, Houston Chronicle  Updated 6:54 am CDT, Friday, March 15, 2019

The liquefied natural gas industry wants to become an outlet for the record amount of methane being produced in the Permian Basin, where much of it is being burned off due a lack of pipelines to move it out of the West Texas shale play.

Methane is the main component of natural gas. During a discussion of  Permian Basin pipelines at CERAWeek by IHS Markit, Matt Schatzman, CEO of the Houston LNG terminal developer NextDecade, said flaring is not a long-term option for handling the natural gas produced as a byproduct oil.

LNG export terminals proposed along the Gulf Coast, he said, could become an outlet for much of the volume.

NextDecade is one of several liquefied natural gas companies seeking to build export terminals along the Gulf Coast. The company is seeking permission to build Rio Grande LNG in the Port of Brownsville and Galveston LNG in Texas City.

LNG is going to be a major part of helping to resolve this gas issue so producers can attain flow assurances so they can produce the much more valuable oil, which is driving the economics of the entire development in the Permian," Schatzman said.

Houston pipeline operator Kinder Morgan is already building two pipelines to move natural gas from the Permian to the Gulf Coast. The company's Gulf Coast Express Pipeline is expected to begin moving 2 billion cubic feet of natural gas per day in October while its Permian Highway Pipeline would move another 2 billion cubic feet per day starting in October 2020.

Some of that natural gas would be shipped on Kinder Morgan pipelines to markets in Mexico. Kinder Morgan Natural Gas Pipelines Gas Group President Tom Martin said exports to Mexico are expected to grow by 2 billion cubic feet per day over the two or three years.

The San Diego company Sempra Energy is developing the Costa Azul LNG export terminal near Ensenada, Baja California that will receive natural gas from the Permian Basin and export it to customers around the world.

The Houston office of Mexico Pacific Limited recently awarded service contracts to move forward with plans to build a pipeline that will move natural gas from the Permian Basin to an LNG export terminal the company is developing in Puerto Libertad, Sonora.

 

GO NATURAL GAS!

Natural Gas: LNG Exports Hit New High, And More To Come

Mar. 18, 2019 3:37 PM ET     seekingalpha.com 

Summary

LNG feedgas hit a new high of ~5.8 Bcf/d.

Over the coming months, the commodity will jump to ~8 Bcf/d, helping alleviate some of the surplus we see in the market.

Lower 48 production remains stubbornly high, but with the release of 2019 capex budgets, we see US natural gas producers pulling back growth.

Over the long term, we don't see sub-$3 gas being sustainable because DUCs continue to decrease. Prices will need to increase to incentivize more rigs.

But even if there's a bull market in gas, it won't start until the winter of 2019-2020.

 

Link to full article:  https://seekingalpha.com/article/4249556-natural-gas-lng-exports-hi...

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