Update: First LNG export from Louisiana delayed for another month or two

UPDATE

First LNG export from Louisiana delayed for another month or two

Daily Report Staff  January 14, 2016  businessreport.com

Cheniere Energy Partners says it now plans to export the first liquefied natural gas cargo from its Sabine Pass terminal in Louisiana in late February or early March, a delay from the previous estimate of late January.

Bloomberg reports the company is citing “instrumentation issues” discovered during the final phases of plant commissioning and cool-down as the reason for the delay. The issues will require additional work over the next few weeks. Bechtel Corp. is the engineering and construction contractor.

“With construction of Train 1 finished, we remain well ahead of the guaranteed contractual schedule with Bechtel and anticipate no issues in meeting all contractual targets and guaranteed completion dates,” says Neal Shear, Cheniere’s interim president and chief executive officer.

The liquefaction plants are referred to as trains. Trains 2 through 5 continue to be on an ”accelerated schedule,” Shear says.

The shale gas boom is projected to transform the U.S. into one of the world’s largest suppliers of the fuel by the end of the decade. The country may be capable of exporting 7.76 billion cubic feet of gas a day by 2019, a Bloomberg New Energy Finance analysis shows. The commissioning cargo from Sabine Pass would be the first LNG shipment from the lower 48 states.

Plants such as Sabine Pass will cool and liquefy natural gas to 1/600th of its volume for easier loading onto tankers. Cheniere plans to build at least six trains to produce LNG at Sabine Pass by late 2018, allowing the terminal to supply more than 3.5 billion cubic feet a day. The project is estimated to cost at least $15 billion.

As reported on Wednesday, a fleet of tugboats that have gone unused over the past seven years are waiting along the Louisiana coast to assist in the LNG exports.

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Replies to This Discussion

Permalink Reply by JHH on October 5, 2015 at 13:04

Very excellent.  Let the exports begin!

Permalink Reply by John Smith on October 6, 2015 at 2:03
Where exactly is this natural gas coming from for Cheniere?
Which Field or Fields?
Permalink Reply by Skip Peel - Mineral Consultant on October 6, 2015 at 2:08

Multiple sources.  At this time it appears the bulk of gas liquified at the Cheniere Sabine Pass export facility will come from the Marcellus Play in Pennsylvania and West Virginia.  Currently it is the least expensive gas available.  With profit margins for LNG declining, cost of supply appears to be the number one concern for exporters.

Permalink Reply by John Smith on October 6, 2015 at 2:11
Why was I under the impression that they had pipeline issues...
Permalink Reply by Skip Peel - Mineral Consultant on October 6, 2015 at 2:22

There have been three "interconnect pipelines", of which I am aware, that Cheniere has built to give them multiple connections to long distance transmission pipelines.  These have been relatively short in distance because so many long distance lines are located in south Louisiana.  If corporate announcements are accurate this will give the company supply options for the total plant capacity including all the planned trains.

To get the details you can read through Cheniere's past press releases.

http://phx.corporate-ir.net/phoenix.zhtml?c=101667&p=irol-news&...

Permalink Reply by John Smith on October 6, 2015 at 3:20
Thanks Skip
Permalink Reply by Thomas Hall on October 9, 2015 at 7:52
Why don't they use Haynesville Shale gas ? Wouldn't that be cheaper to pipeline ?
Permalink Reply by Skip Peel - Mineral Consultant on October 9, 2015 at 9:57

The cost to produce an mcf of Haynesville gas is higher than the cost in some other plays particularly the Marcellus Shale.  The difference is so great that companies can incur the cost to transport Marcellus gas and still sell it cheaper than Haynesville at the Henry Hub which is practically in Haynesville's backyard.  Then there are the oil and liquids plays that produce "associated gas".  In essence there is no cost to produce that gas and anything above transportation costs is a profit.

Permalink Reply by Thomas Hall on October 10, 2015 at 1:06
I would hope the new markets for gas from any play would help the over supply and increase the price and demand
Permalink Reply by Skip Peel - Mineral Consultant on October 10, 2015 at 3:14

Supply is projected to exceed demand for years.  If you look at the U.S. natural gas futures prices by month, the first month of $4 is January, 2022.  The last time I looked.

Permalink Reply by Skip Peel - Mineral Consultant on October 17, 2015 at 6:56

Mike, absolutely on agreeing to disagree.  You make good points.  Beyond those points however remain the facts that the areal extent of the Marcellus/Utica is quite large regardless of formation thickness and any drilling or completion improvements available to to Haynesville operators is also available in all basins.  What makes Haynesville gas cheaper also makes Marcellus cheaper.  I also expect that there will be additional productive intervals in the Marcellus footprint.  The Rogers Shale is getting some notice.  Let the Marcellus/Utica turn into a combo play and it will require rethinking just how much recoverable hydrocarbons it contains. If the political hurdles were not so high in the NE I would agree fully with your point that new pipelines open better markets than the Gulf Coast.  However we will have to see how that plays out.  So far it appears that opposition is high to any industry activity in a number of NE states that should be embracing natural gas.

Permalink Reply by Don Skotty on October 19, 2015 at 14:31

I believe Dominion's Cove Point Liquifaction facility in Maryland will be the next export facility to go online, in late 2017.  That will help a bit with this glut of Marcellus gas.

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