Zero to 68: US set to join top 3 LNG exporters

  • Secretary of Energy Rick Perry, with the main cyrogenic heating exchange behind him, speaks with reporters at Dominion Energy's Cove Point LNG liquefaction Project facility in Lusby, Md., on July 26, 2018. The completion of the facilities export expansion project makes it just the second LNG export facility in the U.S. From zero exports of LNG three years ago, the U.S. is poised to join the top three by 2020. (Photo/Cliff Owen/AP)

It’s going to be a big growth year for U.S. exports of liquefied natural gas, with three more terminals set to start operations in 2019 and developers already this month committing to a $10 billion investment for another project. Plus, final investment decisions are anticipated on two or three more gas export terminals.

“North America is set to lead an expected record year for LNG project sanctions,” Alex Munton, principal analyst for Americas LNG at energy consultancy Wood Mackenzie, said in a prepared statement. “The first half of 2019 will be an especially busy one for the United States.”

By early 2020, U.S. LNG export capacity could total more than 68 million tonnes per year, or about 15 percent of global capacity, and boosting the United States to third place behind Qatar and Australia. That’s up from zero exports just three years ago, before Cheniere Energy in February 2016 shipped the first cargo from its terminal in Sabine Pass, La.

At full production in early 2020, the six U.S. liquefaction plants could consume almost 10 percent of the country’s 2018 marketed gas production.

Though U.S. LNG exports started 50 years ago in Alaska, the tremendous increase in shale gas production in the Lower 48 states over the past decade burst into the global LNG market by making seemingly unlimited supplies available at affordable prices.

The small LNG plant in Nikiski — built by Phillips Petroleum and Marathon Oil in the 1960s — was the only North American export terminal in operation when it loaded its last cargo in 2015 and shut down amid strong global competition. ConocoPhillips sold the mothballed plant in 2018. Marathon now owns it and has not announced specific plans for the property.

Most of the new U.S. LNG plants have been built on the Gulf Coast, with two East Coast exceptions: Cove Point, on Maryland’s Chesapeake Bay; and Elba Island, on the Savannah River in front of the Georgia city of the same name.

Of the six export terminals that will be in operation by the end of this year, five were cost-efficient additions of liquefaction units, called trains, to existing but unused or significantly underused LNG import terminals.

Originally an import terminal from the 1970s, Cove Point LNG, owned and operated by Virginia-based Dominion Energy, shipped its first export cargo in April 2018. Its liquefaction capacity is 5.25 million tonnes per year.

Kinder Morgan’s Elba Island terminal is unique in that it will operate 10 small-scale, modular trains with a total capacity of 2.5 million tonnes per year. Federal regulators on Feb. 1 gave permission to start commissioning the first train.

Kinder Morgan expects all 10 units to be in production by the end of the year. Elba Island started as a receiving terminal in 1978.

Opened in 2008 as an import terminal, Cheniere’s Sabine Pass project in Louisiana was the first to add liquefaction and LNG exports. It now has four trains in operation, with a fifth scheduled to start production in the second quarter of 2019, bringing its total capacity to 22.5 million tonnes.

In addition, Cheniere has signed up Bechtel as the engineering, procurement and construction contractor for a sixth train, with the final investment decision predicted in the first half of 2019.

Cheniere’s second Gulf Coast export terminal — Corpus Christi, Texas — is the only one of the six that did not build on an unused import operation. Its first train started service in November 2018; commissioning is underway on a second train; and a third train is scheduled to enter service in 2021 — each at 4.5 million tonnes per year.

Meanwhile, Cheniere is looking at adding up to seven mid-scale trains at Corpus Christi, boosting total output capacity to 23 million tonnes.

Freeport LNG, owned by private investors, has three trains under construction at its Texas terminal, each at 5 million tonnes per year and scheduled to come online late 2019 through early 2020. A fourth liquefaction train is waiting on regulatory approval.

San Diego-based Sempra Energy and its partners plan to start production by April from the first train at Cameron LNG in Hackberry, La. The next two trains are set to come online before the end of the year, bringing total capacity to 13.9 million tonnes per year.

Sempra also is looking at building a new LNG export facility in Port Arthur, Texas, targeting late 2019 or early 2020 for an investment decision on the 11-million-tonne-per-year project. The Federal Energy Regulatory Commission issued its final environmental impact statement in late January.

The newest entrant to the export trade, Golden Pass LNG, was given the go-ahead for construction Feb. 5 by its partners Qatar Petroleum (70 percent) and ExxonMobil (30 percent). The $10 billion project in Texas, across the river from Cheniere’s Sabine Pass operation, is planned for 15 million tonnes per year with start-up by 2024 at the site of an unused import terminal.

“On a dollars-per-tonne basis, it’s still one of the lowest-cost opportunities for new large-scale liquefaction capacity anywhere in the world,” Wood MacKenzie’s Munton said of Golden Pass.

It’s the only one of the bunch being developed by oil-and-gas producers.

Virginia-based Venture Global is awaiting FERC approval — perhaps at the commission’s Feb. 21 meeting — for its Calcasieu Pass LNG in southwestern Louisiana. The company has hired Kiewit to build the 10-million-tonne-per-year, $8.5 billion project. Venture Global expects to make a final investment decision in the first half of 2019 and has signed 20-year offtake agreements with Shell, BP, Italy’s Edison, Portugal’s Galp, Spain’s Repsol and Poland’s PGNiG.

Another new entrant, Houston-based Tellurian, also is targeting the first half of 2019 for an investment decision on its $16-billion Driftwood LNG project. FERC issued its final environmental impact statement in January, though the developer has yet to announce any binding offtake deals for Driftwood. Tellurian is planning as much as 27.6 million tonnes per year capacity at the plant on the west bank of the Calcasieu River, south of Lake Charles, La.

Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Updated: 
02/13/2019 - 10:23am

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