LNG

JERA Co. Inc., Japan’s biggest liquefied natural gas importer and utility company, has approved a deal to sell part of its stake in the Freeport LNG export plant in Texas to another Japanese company.

Japan’s biggest liquefied natural gas importer, JERA Co. Inc., has named James Tinsley as Chief Commercial Officer of the JERA Americas subsidiary based in Houston in Texas as the Japanese company also hinted at US expansion moves.

The Freeport LNG export plant at Quintana Island in Texas has revealed plans for a carbon-capture and sequestration project a day after Japanese LNG importer and power asset holder JERA Co Inc. acquired a significant stake in the US liquefaction and export business.

The US Freeport LNG export plant at Quintana Island in Texas has been given three more years by the Federal Energy Regulatory Commission to complete its Train 4 expansion at the facility by May 2026.

Freeport had previously delayed its own final investment decision on building a fourth Train until 2021 because of the depressed energy markets and low prices and demand.

“As with most LNG projects around the world, Covid-19 and other market challenges have negatively impacted our development efforts,” Freeport said at the time.

Now the FERC has granted Freeport’s recently filed request for a formal delay to completion of the fourth Train at the project, led by the company’s Chief Executive, the energy entrepreneur Michael Smith.

Freeport began commercial operations in May 2020 for its third Train with liquefaction services for French major Total and South Korean utility and energy company SK E&S under their tolling agreements.

Previously, Freeport CEO Smith had said he was unsure when he would advance the Train 4 expansion as he had no firm long-term contracts in place for the fourth Train.

A preliminary agreement signed in 2018 by Japanese trading house Sumitomo Corp. for 2.2 million tonnes per annum from Train 4 expired without being finalized.

Smith cited a list of challenges facing FIDs in February 2020 before the Covid-19 shutdowns, including record low prices and weaker than expected demand in Asia. At the time Covid-19 had been confined to China.

He said this had created a perfect storm of headwinds for producers looking to construct new liquefaction plants or additional processing Trains.

The FERC said that it had issued public notice in August 2020 of the applicant’s request for an extension of time to build Train 4 and noted that no comments were filed from the public against such a move.

“Based on the facts presented in the request, the applicants are granted an extension of time until and including May 17, 2026, to complete construction of the project and make it available for service,” the FERC said in its statement.

Freeport LNG Development will now be able to go ahead in its own time to construct the additional facility in Brazoria County, Texas.

“The proposed Train 4 Project will allow the applicants to liquefy for export an additional 5.1 metric tonnes per annum of LNG or the equivalent of approximately 0.74 billion cubic feet per day of natural gas,” the FERC order stated.

More than a dozen US developers are pursuing projects for new plants or additional production capacity and have yet to announce positive FIDs.

Only Venture Global has been moving to the construction stage with two new projects in Louisiana, Calcasieu Pass and the Plaquemines facility.

The first phase construction at Freeport saw the building of three Trains and 15 MTPA of output.

The original Freeport terminal was completed in 2008 as an import facility with one berth and two storage tanks, each of 160,000 cubic metres capacity.

A second loading berth and a 165,000 cubic metres capacity full containment LNG storage tank were added. The Train 4 project is the scheduled second phase of construction.

About 13.4 MTPA of Freeport production capacity from the first three Trains has been contracted under use-or-pay liquefaction tolling agreements with customers including European and Japanese contract holders, BP of the UK, Germany’s Uniper and Japan’s Jera Co. Inc. and Osaka Gas.

The first three Trains were built by a consortium including McDermott International and Zachry Construction Corp. of the US, along with Chiyoda Corp. of Japan.

However, US engineering company KBR was selected by Freeport as the preferred bidder for the engineering, procurement, construction, and commissioning contract for the fourth-Train expansion.

Under the terms of the contract, KBR would provide EPC, commissioning and start-up of a nominal 5 MTPA LNG Train and associated gas pre-treatment plant.

There is now a question mark over that Train 4 EPC contract as KBR has said it is pulling out of lump-sum LNG and energy construction projects.

The selection of KBR was made following completion of a nine-month front-end engineering and design verification, execution planning and EPC proposal process.

US engineering company KBR, a world leader in liquefaction plant construction projects, said it would exit most of its LNG on-site building ventures and other related projects because of the global reduction in energy investments.

The Houston, Texas-based company will now refocus on its government contracts and technology businesses, according to a conference call statement to investors and letters to employees from Chief Executive Stuart Bradie.

“KBR will no longer engage in lump sum, blue collar construction services,” said Bradie, explaining that the Covid-19 pandemic accelerated the decision to leave fixed-contract energy projects.

KBR holds contracts for engineering and construction services for several LNG export projects, including Freeport LNG’s Train 4 expansion at Quintana Island in Texas, Pieridae Energy’s proposed Goldboro LNG facility in the Canadian province of Nova Scotia and Glenfarne Group's Magnolia LNG project in Louisiana.

Freeport LNG has delayed its expansion project to 2021 and planned to seek new bids for construction.

KBR gave no details of potential impairments in its next earnings because of the LNG and energy construction pull-back, though it said in a recent strategy Webcast on June 16 that it expected the energy business to be “marginally profitable” in 2020.

CEO Bradie is expected to disclose more details when the second-quarter results are released in July

Bradie told investors in the conference call that about 85 percent of the company's forecast earnings for 2020 are expected to come from the government-related contract business, up from about 11 percent in 2015.

KBR said the changes would mean “significant realignment” in some offices as the management transforms the business to the new structure and to new ways of working, while exiting certain markets and regions.

KBR appears to be only existing “construction services” and is expected to continue with its consulting business in the energy and related sectors.

Its most recent energy contract awarded in May 2020, was a master service agreement and feasibility study by Japanese resources company JX Nippon Oil & Gas Exploration Corp.

The contracts will be executed by KBR’s Energy Solutions division, which includes sectors such as onshore oil and gas, LNG liquefaction and regasification, floating LNG and refining.

KBR said it was building on a strong and successful portfolio in the of options for Carbon Capture and Sequestration (CCS), alongside blue hydrogen production relating to oil and gas fields in Southeast Asia.

In the JX Nippon project, KBR will provide technical consultancy services in relation to developing concepts and technology recommendations for the capture of carbon-dioxide (CO2), re-injection and production of blue (carbon free) hydrogen.

The project will be led primarily from KBR's consulting hub in Singapore.

US engineering company KBR reported an increase in second-quarter revenues as the energy project backlog surged ahead, led by the contract award for Train 4 at the Freeport LNG export plant on Quintana Island in Texas.