2019 could be a ‘year of incongruity’, as developers are rushing to reach financial close on an array of LNG export projects despite a backdrop of a market tipping into oversupply. North America leads the next wave of global LNG project sanctions in 2019, with three US Gulf Coast developments – Sabine Pass Train 6, Golden Pass and Calcasieu Pass – expected to reach FID before the summer.
Despite rising oil prices and production levels U.S. gas fracking companies are continuing to lose money, according to a review of the Institute for Energy Economics and Financial Analysis (IEEFA). In the third and fourth quarter of 2018, the 32 mid-size U.S. exploration companies reported nearly $1 billion in negative cash flows.
Following eight years of global economic growth, economists agree a downturn is simply a matter of when and how deep. The worst case scenario, according to Wood Mackenzie, would be a recession occurring in 2020 or 2021 – just after 60-100 mtpa of LNG has taken FID.
The spread in natural gas spot prices between the Henry Hub in Louisiana and the Appalachian region continued to narrow over the year just past. Prices fell at Henry Hub throughout December, and in early January 2019, they were at around $2.79/mmBtu while Appalachian prices kept trading at a discount due to pipeline constraints.
California-based Sempra Energy has decided to sell its equity interests two utilities in Chile and Peru to focus on its LNG export ventures in North America. Sempra CEO Jeffrey W. Martin said “this planned sale allows us more focused capital investment in the U.S. and Mexico.”
Britain is strong market for sellers looking to home excess gas supply this winter, National Grid said when announcing a record send-out of its Grain LNG import terminal. A robust NBP price and anticipated lower variable costs for gas processing are likely to keep attracting spot cargoes to the UK.
NextDecade Corp. envisages reaching financial close on the 27 mtpa Rio Grande liquefaction and export project in Texas in the third quarter of this year. The project remains subject to final review by the Federal Energy Regulatory Commission (FERC).
Steelhead LNG, developer of the near-shore export plant on Vancouver Island, is investigating the pipeline route to bring feed-gas from the Chetwynd area of northeast British Columbia to Sarita Bay. Plans are to build a LNG export facility with initial capacity of 12 mtpa, requiring 1.9 Bcf/d of feed-gas.
Houston-based Kinder Morgan has touted it will supply up to 40% of the gas volumes for future U.S. LNG and pipeline exports, and stays on schedule to start up its own small-scale LNG export venture at Elba Island, Georgia, in Q1-2019.
Development banks of Brazil and Germany, BNDES and KfW Ipex-Bank, have agreed a corporate financing deal worth R$1.76 billion ($471m) for an LNG-fuelled power project at the port of Açu, Brazil. The financing covers 39% of the total project costs of R$4.5 billion, with the 1.3 GW plant to be built by Prumo Logística and Siemens.
SeaFloat, a barge-mounted power plant based on SGT-800 gas turbine, will be provided by Siemens and the maritime arm of ST Engineering for Bermuda-based Seaboard Corp. The 145 MW power barge, dubbed Estrella del Mar III, will supply the Dominican Republic with electricity at a lower cost than a land-based plant staring from spring 2021.
The US Department of Energy (DOE) has eased reporting mandates for liquefied natural gas exporters that would keep track of the ultimate end-user of the natural gas shipped overseas. It had become apparent, the DOE said, that it was “impracticable, if not impossible” for exporters to comply with the end-use reporting requirement.
Argentina’s LNG export aspirations may soon be a reality as Exmar, the Belgian shipping firm, has entered a 10-year charter with YPF to deploy a floating LNG liquefaction vessel at Bahia Blanca, about 400 miles south of Buenos Aires. Operations are scheduled to start in Q2-2019, for the first cargo to set sail before year-end. The Exmar FLNG barge is expected to be a quicker route-to-market for excess production from the prolific Vaca Muerta shale gas field than a rival FLNG venture, under evaluation by Transportadora de Gas del Sur (TDS) and Excelerate.
Strong, sustained growth in U.S. gas production is putting downward pressure on Henry Hub spot and futures prices. Dry gas production increased to 83.3 Bcf/d in 2018, according to figures by the U.S. Energy Information Administration (EIA), which forecasts a subsequent fall in Henry Hub spot gas prices to $3.11/MMBtu on average in 2019.
Tellurian to start works on Driftwood LNG in H1-2019
Tellurian Inc., developer of the Driftwood LNG export project in Louisiana, seeks to start construction near the Lake Charles site in the first half of 2019 after regulators issued a final environmental impact statement (EIS). The final EIS was issued by the Federal Energy Regulatory Commission (FERC) to develop the 27.6 mtpa liquefaction plant and its associated 96-mile pipeline. Meg Gentle, Tellurian President and CEO, thanked the FERC for remaining on schedule with the approval and now awaits the agency’s order granting authorization to site, construct and operate the Driftwood project. “Tellurian will then stand ready to make a final investment decision and begin construction in the first half of 2019,” Gentle stated, suggesting “the first LNG [is] expected in 2023.” Striving to bring LNG to market, Tellurian signed a preliminary accord with the Swiss trading house Vitoal to supply 1.5 mtpa of LNG cargoes for 15 years. The deal is based on the Japan Korea Marker (JKM) price and cargoes on a free-on-board (FOB) basis whereby Vitol provides its own shipping.