LNG

US midstream company Energy Transfer is targeting financial close on its 16.5 mtpa Lake Charles LNG project in 2026, having secured sufficient offtake commitments to underpin project finance.

Midstream operators in the US have announced fresh investment in gas storage capacity to provide flexibility as the LNG build-out progresses into 2026. Enbrige just took FID on new storage facilities in Texas and Louisiana while Energy Transfer started to build a cavern storage at Bethel.

Energy Transfer has delayed its final investment decision (FID) on the $10.9 billion Lake Charles LNG export project to the first quarter of 2026, instead of year-end 2025 as intended earlier. This hold-up follows lengthy development stages, uncommitted volumes and rising concern over LNG oversupply risk.

Chevron has agreed to offtake an additional 1 mtpa from Energy Transfer's Lake Charles LNG export terminal. The 20-year agreement increases Chevron’s contracted volumes to 3 mtpa, as the US oil major seeks to expand its global gas business.

July 16 (LNGJ) - Energy Transfer, the owner of pipelines and other assets in the Permian Basin and the US Gulf Coast as well as the currently stalled LNG export project at Lake Charles in Louisiana, has completed the acquisition of WTG Midstream for $3.25 billion in cash and shares.

   Energy Transfer bought WTG from affiliates of US assets manager Stonepeak, the Davis Estate and Midland, Texas-based Diamondback Energy. The acquired assets add around 6,000 miles of gas gathering pipelines that extend the network in the Midland Basin as well as eight gas processing plants with a total capacity of 1.3 billion cubic feet per day and two additional processing plants which are under construction.

Energy Transfer, the owner of pipeline and other assets in the Permian Basin and other shale basins in the Gulf Coast states as well as the Cushing crude oil delivery system and with a currently stalled LNG export project at Lake Charles, has signed a deal to acquire WTG Midstream for $3.25 billion in cash and shares.

The latest US oil and gas acquisition comes in the busiest year on record for US mergers and acquisitions numbering more than a dozen in the past 12 months and involving energy majors like ExxonMobil Corp. and Chevron Corp. as well as second-rung operators.

Energy Transfer said it was buying WTG Midstream from affiliates of US assets manager Stonepeak, the Davis Estate and Midland, Texas-based Diamondback Energy.

Transaction terms

The total consideration for the transaction will comprise $2.45Bln in cash and around 50.8 million newly issued Energy Transfer common units.

The transaction is expected to close in the third quarter of 2024, subject to regulatory approval and customary closing conditions.

Energy Transfer, based in Dallas, Texas, said that WTG provided comprehensive midstream services including wellhead gathering, intra-basin transportation and processing services.

“The company’s 6,000-mile pipeline network serves significant operators in some of the most active areas of the Midland Basin including Martin, Howard, Upton, Reagan and Irion counties,” said a statement on the deal.

WTG also operates eight processing plants with a total capacity of around 1.3 billion cubic feet per day and is constructing two new plants with an additional capacity of 0.4 Bcf per day.

The first new plant is expected to be in service in the third quarter of 2024 and the second plant the third quarter of 2025.

Huge portfolio

Energy Transfer currently owns and operates one of the largest portfolios of energy assets in the US comprising more than 125,000 miles of pipeline and associated energy infrastructure.

The company’s strategic network spans 44 states with assets in all of the major US production basins.

Energy Transfer’s acquisition also includes a 20 percent interest in BANGL Pipeline, a 425-mile Natural Gas Liquids pipeline with an initial capacity of 125,000 barrels per day, expandable up to more than 300,000 barrels per day and connecting the Permian Basin to markets on the Texas Gulf Coast.

“The company benefits from well positioned assets in the Permian which is the most active region in the US and this acquisition is expected to provide future upside as the basin continues to develop on and around Energy Transfer’s infrastructure,” explained the company.

RBC Capital Markets is serving as financial advisor to Energy Transfer, and Vinson & Elkins LLP is acting as Energy Transfer’s legal counsel on the transaction.

Jefferies LLC is serving as financial advisor to WTG and Sidley Austin LLP is acting as WTG’s legal counsel.

The American Gas Association (AGA), the industry group representing over 200 utility companies delivering natural gas throughout the US, said the Administration of President Joe Biden has moved to block pending approvals of liquid natural gas export permits to please climate activists in an election year.

“While hailed as a victory by climate advocacy groups, the decision could ultimately increase total global emissions, with US LNG having 50 percent lower supply chain emissions than Russian natural gas,” said the AGA.

“Natural gas has been the single biggest factor in reducing US greenhouse-gas emissions and could have the same effect around the world,” explained the AGA.

AGA President and Chief Executive Karen Harbert said the future shortages of American natural gas on global markets would result in higher energy costs for US allies, cause energy shortages in the developing world and would please other gas producers like Russia and Iran.

Economic growth

“The United States should not undercut our allies or fund our enemies with a policy that will increase global emissions and hamstring an engine of economic growth,” stated Harbert.

“Freezing approvals for LNG export terminals should be reconsidered immediately,” she said.

The AGA lobbies on behalf of the local energy utilities that deliver natural gas throughout the US to more than 77 million residential, commercial and industrial natural gas customers of which 73M customers receive their gas from AGA members.

“While some advocates against increasing LNG exports have suggested that sending more natural gas overseas could increase domestic prices for US consumers, the government’s own data disproves that theory,” said the AGA.

Analysis from the US Energy Information Administration have suggested that boosting LNG exports would have a minimal impact on US prices thanks to the significant quantities of natural gas available in the US.

Projects likely affected

Four key LNG export plants are expecting to be affected by the US Administration’s blocking policy.

The projects at risk of delay include at least one in Texas and three in Louisiana. They are Sempra Infrastructure’s Port Arthur venture as well as Commonwealth LNG, the Energy Transfer project at Lake Charles and Venture Global’s proposed Calcasieu Pass II (CP2) project.

The last review of US LNG export projects was in 2018, though Biden is seen having moved to act in an election year to boost his environmentalist credentials.

Biden warned that climate change was “the existential threat of our time” in his revised policy on LNG.

“During this period, we will take a hard look at the impacts of LNG exports on energy costs, America’s energy security and our environment,” the President declared.

LNG stabiliser

The AGA concluded that freezing American LNG export permits would have a slowing effect on US economic growth, taking away significant potential job growth while handing an economic victory to America’s adversaries overseas.

“Exports of LNG act as a stabilizing pull factor, with demand that encourages producers to avoid sharply reducing production when faced with low domestic prices,” the AGA noted.

The AGA was founded in 1918 and more than 100 years later in the 2020s natural gas met more than 30 percent of energy needs in the US.

EQT Corp., the leading US natural gas producer in the Appalachia Shale Basin, reported second-quarter losses due to falls in output and prices, though advanced its direct liquefied natural gas prospects by signing a heads of agreement for tolling at the Lake Charles LNG export project in Louisiana for 1 million tonnes per annum.

July 13 (LNGJ) – US pipelines and terminals company Energy Transfer LP has entered into three non-binding Heads of Agreement deals including one for Japan and one for commodities firm Gunvor. One accord specifies that a Japanese consortium would buy 1.6 MTPA over 20 years subject to an option to convert the offtake to an equity participation providing for the same LNG volume.

   Under a second HOA Chesapeake Energy Marketing of the US would supply the Lake Charles plant with feed gas sufficient to produce 1.0 MTPA of LNG for a period of 15 years and, post liquefaction, the volumes would be bought by Gunvor’s Singapore trading unit. That deal is for 15 years and linked to the Japan-Korea Marker price. The third HOA is with an unnamed US customer and relates to a tolling arrangement for 1.0 MTPA over 15 years.

June 23 (LNGJ) - Energy Transfer, the owner of pipeline and other assets in the Permian Basin and other shale basins in the Gulf Coast states as well as the Cushing crude oil delivery system, has learnt from regulators that its Lake Charles LNG project would not be proceeding as planned. The DoE has released a statement saying it would not rehear pipeline operator Energy Transfer's request for a second extension of its permit to export cargoes from its Lake Charles LNG export project.

   However, the Dallas, Texas-based company had a door left open for the Lake Charles venture when the DoE added that it would consider a fresh application from Energy Transfer if the company was unable to meet its deadline of 2025 for exports to begin from the plant. Energy Transfer is seeking to transform the existing Lake Charles LNG import terminal into an export facility.