Great Year for U.S. LNG Exports

Fred H. Hutchison for
Central Europe Energy Partners Q1 2018 Report

Although we are just barely one quarter into 2019, the year is already shaping up to be one of the most momentous in the history of the nascent U.S. LNG export industry: three new projects are expected to enter into service, up to eight more are likely to be approved by U.S. regulatory authorities, and several that have all of their government permits are expected to reach a final investment decision (FID).

As a result of the shale energy revolution, the United States has gone from a natural gas importing nation to a major natural gas exporter in less than a decade. There are now three major U.S. LNG export facilities in operation: five “trains” at Cheniere Energy’s Sabine Pass liquefaction project in Louisiana, one train at Dominion Energy Cove Point in Maryland, and one at Cheniere’s Corpus Christi facility in Texas.

Two more trains at Corpus are expected to enter commercial service in 2019 and these will be joined by the first phase of Kinder Morgan’s medium-scale liquefaction project in Savannah, Georgia, and at least one (possibly two) trains at the Cameron LNG facility that Sempra Energy is building in Louisiana (with affiliates of Total, Mitsubishi, and Mitsui). Rounding out this first “wave” of LNG projects is the Freeport project in Texas that is expected to see one train begin LNG production this year.

By the end of 2019, LNG production in the United States will have reached »65 million tons per annum, and his will have been achieved without harming U.S. domestic natural gas consumers because U.S. gas production will inevitably expand to meet demand and thereby keep prices in check.

Beyond, the six projects which are now being built, one other facility will soon begin construction. That is the Golden Pass project that is being converted from an LNG import terminal to an export facility by subsidiaries of Qatar Petroleum and ExxonMobil. (First exports from Golden Pass are expected to occur sometime in 2024.)

While all of this news is incredibly exciting, a second and potentially larger wave of U.S. LNG export facilities is waiting in the wings. This wave includes expansions for the Sabine Pass, Corpus Christi, Cameron, and Freeport facilities and new projects planned in Louisiana, Texas, Mississippi, Florida, and Oregon. Of the new projects, four have already received all necessary permits from U.S. regulators. These are the Magnolia LNG, Lake Charles, and Calcasieu Pass projects in Louisiana, and the offshore (floating) liquefaction project proposed by Delfin LNG.

Besides these projects which are fully permitted, ten more projects are pending before the Federal Energy Regulatory Commission (FERC) and the U.S. Department of Energy (DOE). FERC has set an ambitious schedule for these ten projects and up to eight of them could be approved by the end of the year (presuming the agency sticks to its schedule). Once FERC has acted to approve the construction of each facility it is up to DOE to issue a license to export the gas molecules, and under the leadership of DOE Secretary Rick Perry, the department has been doing so within days of the final FERC order.

After a company has secured its federal (and state/local permits), it must secure binding offtake agreements with customers, arrange equity and debt financing, and then proceed to a final investment decision (FID).

Several companies have stated their intent to take FID on their projects in 2019, including Tellurian’s Driftwood, LNG Ltd.’s Magnolia, and Venture Global’s Calcasieu Pass liquefaction projects. Sempra Energy is targeting two LNG projects for a FID in 2019, its Port Arthur facility and the Costa Azul Energia project in Ensenada, Mexico (just south of the U.S. border), which will liquefy U.S. natural gas.

In addition to these projects, several others could move towards FID in 2019 if they can secure long-term (15 to 20 year) contracts with creditworthy offtakers.

All in all, 2019 is shaping up to be a terrific year for U.S. LNG exports. Several new projects will come online, at least one more will break ground, and many others could soon follow suit. Stay tuned for developments!