LNG Exports: Cheniere's Corpus Christi LNG Gets Approvals For Train 1 Project
The $5.5 billion Train 1 at Corpus Christi is in its final commissioning stages and is expected to be fully operational in the first quarter of 2019; the $5.5 billion Train 2 is under construction and is expected to start up in a little more than a year's time. Each has a 4.5 million-metric-ton-per-year capacity. For more information, see Industrial Info's project reports on Train 1 and Train 2.
In June, Cheniere filed an application with the U.S. Federal Energy Regulatory Commission (FERC) for the proposed, $10 billion Mid-Scale LNG Plant in Corpus Christi, located next to the LNG complex. The plant, as designed, would comprise seven mid-scale liquefaction trains with a total nominal production capacity of about 9.5 million metric tons per year; each train would produce about 1.4 million metric tons. If approved, construction would not begin until first-quarter 2022, at the earliest. For more information, see Industrial Info's project report.
Among Cheniere's key developments during the second quarter of 2018 was its final investment decision in favor of a billion third production train in Corpus Christi, which would be completed in mid-2022.
Cheniere Sabine Pass
Cheniere's Sabine Pass facility in Cameron, Louisiana, the first in the U.S. to export LNG, is making strides on a $2.5 billion fifth LNG production train. Like the four operational trains, Train 5 would have a nominal production capacity of 4.5 million metric tons per year, as would the proposed, $2.5 billion sixth train. Train 5 is undergoing commissioning, while Train 6 has received all necessary permits and is "shovel ready," according to statements from one Cheniere official earlier this year. For more information, see Industrial Info's project reports on Train 5 and Train 6.
Cheniere reported a net loss of $18 million for second-quarter 2018, compared with a net loss of $285 million in the same period last year. The improvement was attributed in part to additional operational trains at Sabine Pass. During the first half of 2018, Sabine Pass exported 128 LNG cargoes, compared with 91 in the first half of 2017; none were commissioning cargoes. In total, more than 400 LNG cargoes have been exported from Sabine Pass since it opened in 2016, with deliveries to 28 countries.
Paced by expectations of continued production growth in the Permian Basin and the Marcellus and Utica shales, U.S. natural gas production is predicted to continue growing over the next decade, to about 125 billion cubic feet per day (Bcf/d) in 2027 from approximately 95.2 Bcf/d in 2017, estimated Gregory Ruben, vice president of business development for Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas).
U.S. LNG exports are expected to grow to slightly more than 12 Bcf/d in 2027, up from just less than 1 Bcf/d in 2017, Ruben told the COGA conference attendees. The Power Industry will increase its demand for gas over the next nine years, growing 9.4 Bcf/d as an estimated 33,000 megawatts of coal-fired generation will be retired and replaced with gas-fired generation.
Pipeline exports to Mexico could nearly double over the next nine years to about 7 Bcf/d in 2027, from last year's 4 Bcf/d, Ruben added.
"U.S. exports of LNG to Asia are very competitive with the rest of the world," Ruben said.
Spomer added: "From an export perspective, LNG exports to Asia now are like night and day" compared to a few years ago. Asian LNG prices are up 41% to about $10.25 per million cubic feet (Mcf), she said, adding they briefly hit $12 per Mcf this summer. U.K. prices are up 50%. "We have a sustainable, low-cost feedstock that is the envy of the world," the former LNG project executive opined.
Spoomer noted U.S. LNG operators signed eight long-term LNG supply contracts with customers during the first half of 2018. By comparison, Spomer said, no such contracts were signed during the first halves of 2016 and 2017.
China's imports of LNG were up 50% in the first half of 2018 over the comparable year-earlier period, the former LNG executive said, adding: "China is well on its way to becoming the world's largest LNG importer."
But the U.S. Federal Energy Regulatory Commission (FERC) (Washington, D.C.), which has jurisdiction over LNG license applications and interstate pipeline applications, stands between the U.S.'s abundant supply of gas and overseas demand for gas delivered by LNG terminals and trans-national pipelines. Both categories of projects have been backed up because the commission lacked a quorum for much of 2017, which prevented it from taking votes on matters before it. FERC is still digging out from that backlog.
Spomer said there were 13 LNG license applications in the queue at FERC. Her former employer, Jordan Cove, is near the bottom of that list.
Besides FERC, the other potential obstacle facing the gas industry--a trade war--was decried by Spomer: "Gas can't succeed if we go to war with our trading partners." She noted some East Coast project owners had been negotiating LNG contracts with Chinese officials, but those are on hold now due to the bellicose rhetoric and tit-for-tat import duties the leaders of each country have slapped on imports from the other. The total value of those duties is approximately $100 billion.
She added that an overseas client with that country's Ministry of Commerce recently told her: "The U.S. and Australia are breaking every treaty they signed." The official was referring specifically to the Trans-Pacific Partnership (TPP), a trade deal involving 12 countries, including the U.S., Canada, Mexico, Malaysia, Australia and Japan. Negotiated by the Obama administration, the deal was voided by the Trump administration.
Ruben of Kinder Morgan added that Mexican officials are starting to become concerned over U.S. gas supply and policy consistency. Mexico has been a favorite target for criticism by President Trump, and Mexico's newly elected president, who will take office December 1, is said to be reassessing that country's liberalization of its energy market. Those liberalizations have enabled developers to propose numerous energy projects linking the two countries.
Spomer said China's plan to slap a 25% tariff on LNG imported from the U.S. "doesn't take us out of the market, but it makes our LNG less attractive." She estimated the import tariff would drive the landed price of U.S. LNG in China to about $10 per Mcf, up from the current $8 per Mcf. To the Chinese, "Qatari LNG has got to be looking pretty good right now," she added.
Among the largest of these projects is Sempra Energy's (NYSE:SRE) (San Diego, California) facility in Hackberry, Louisiana. The facility will include three 5 million-ton-per-year liquefaction trains. Construction began in late 2014 and is expected to be completed early next year. McDermott International Incorporated (NYSE:MDR) (Houston) is providing EPC on the project, which has an estimated total investment value (TIV) of $10 billion. For more information, see Industrial Info's project report.
In Texas, Freeport LNG Development LP, headed by ConocoPhillips (NYSE:COP) (Houston), is underway with construction of three 5 million-ton-per-year LNG trains in Brazoria County. Construction began in late 2014, and the first train is expected to begin operating in the second half of 2019.
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