US to have added 64 mtpa of LNG export capacity by end of first construction wave

The United States will have added around 64 million tons per annum of liquefied natural gas export capacity once the first wave of construction is completed in about two years, according to Industrial Info Resources.

Cheniere Energy Partners and EPC partner Bechtel completed the first two trains of the Sabine Pass liquefaction project in Cameron Parish, Louisiana, in May and September. The third and fourth trains are due for start-up in the first half and second of 2017, respectively, and the fifth is scheduled for completion in 2018.

A total of $48.2 billion is being spent on all the projects under construction, including the remaining trains at Sabine Pass. Cheniere is building two additional trains in Corpus Christi, Texas. Freeport has three trains under construction in Quintana, Texas. Sempra is building the first three of five planned trains in Hackberry, Louisiana. And in the sole project outside of the Gulf Coast, Dominion Transmission is constructing a liquefaction plant at Cove Point, Maryland.

The D.C. Circuit Court of Appeals last week rejected a legal challenge by the Sierra Club, an environmental organization, against the Federal Energy Regulatory Commission’s review of the Corpus Christi project. It had previously rejected a challenge by Sierra Club against Sabine Pass.

Global headwinds

IIR has compiled a list of 73 projects – comprising 132 trains, and at a total investment of $294 billion – that have been proposed for the United States but for which a formal application to FERC has not yet been submitted. Six additional projects have received FERC approval and are awaiting a final investment decision or notice to proceed, and a further five projects have had applications submitted.

The six approved projects will all begin construction in 2017, according to their developers, but Shane Mullins, IIR’s VP Product Development – Aftermarket, told Petrochemical Update it was unlikely any of these would actually get to construction before 2019.

Developers have been encouraged by the amount of global investment in LNG receiving and regasification terminals, with IIR estimating there are 167 active projects worth $83 billion and adding 486 mtpa of regasification capability. If all these terminals are built within their declared timeframes, supply and demand should come into balance by 2021, Mullins said, but warned that such expectations were optimistic.

On the other side of the equation, about 47 mtpa of new LNG export capacity is expected to come online in 2016, from projects in the U.S., Australia, Malaysia, and Angola. Additionally, Mozambique, Iran and a handful of others are developing LNG export plans, and there is also the prospect of Qatar or Russia adding more capacity, Mullins noted. Qatar accounted for almost one-third of global LNG exports in 2015 at 77.8 million tons, according to the International Gas Union. Seventeen countries exported LNG last year, down from 19 in 2014, owing to the suspension in exports from Angola and Egypt, which were shut down for repair work and feedstock loss.

U.S. projects on hold for now

IIR has concluded from the various plans that supply and demand will likely come into balance around 2024-25, and not in 2021-23 as many forecasts are predicting. It usually takes 50 months to go from final investment decision to full commercial startup, Mullins said, meaning that U.S. projects will only reach FID in 2017 if they intend to come online by 2021.

“That’s if we look at the spot market,” Mullins noted. “If they have contractual agreements, they’ll move forward with the financial decision anyway, because they’ve already got an agreement in place where they’re going to make their fee - which is anywhere from $2.50-3.50/mbtu (million British thermal units).”

He continued, “Will their offtaker agree with them moving forward with a financial decision and come online at a time when they’re going to need those cargoes? Maybe not. It may be more like 2023, so will we see new construction next year of any of these trains? Probably not. I think we might see them reaching a financial investment decision by the end of next year, site prep takes place in 2018, and real construction takes place in 2019.”

Developers in the U.S. will also be keeping an eye on proceedings north of the border, where Woodfibre LNG looks set to become Canada’s first LNG exporter. Woodfibre’s Singaporean parent company authorized the funds for the $1.2 billion (CA$1.6 billion) project in Squamish, British Columbia, last week.

By Nadav Shemer