LNG

Kinder Morgan, the US natural gas pipeline operator and stakeholder in LNG exports and projects, reported first-quarter net income of $1.40 billion compared was a net loss of $306M in the prior-year quarter and said a new Louisiana pipeline expansion to serve Train 6 at Sabine Pass LNG was on track.

Elba Island LNG, the small US export facility near Savannah in Georgia, has been given permission by regulators to begin commissioning the eighth processing Train of its Moveable Modular Liquefaction System pioneered by Royal Dutch Shell.

The US Gulf LNG export project proposed by pipeline company Kinder Morgan for Pascagoula in Mississippi is moving forward on the regulatory front with the Federal Energy Regulatory Commission and other agencies.

Gulf LNG is an existing import terminal that is being transformed into a liquefaction plant to produce around 11.5 million tonnes per annum of LNG for export.

The Pascagoula terminal had originally been constructed to import LNG cargoes from Angola in southwest Africa from a production plant developed by international oil companies, including Chevron Corp.

However, the US shale-gas boom made LNG imports into the US uneconomic and Kinder later decided to consider the export option.

Gulf LNG, co-owned by Kinder Morgan and several US equity funds, has just notified the FERC about the progress of the project and the issue of the final environmental impact statement.

The company said that on March 15, 2019, the Pipeline and Hazardous Materials Safety Administration, now playing a more active part of the FERC process, issued its letter of determination.

This stated that it had reviewed the company’s application and determined that it had demonstrated that the siting of the project complies with Federal Pipeline Safety Standards.

In addition, the company had submitted three replies through March 4, 2019, to data requests from FERC staff on the Draft Environmental Impact Statement (DEIS).

Gulf LNG added that it was working on an update to the Mississippi Department of Environmental Quality’s Permit to Construct and Operate Air Emissions Equipment and an update to the US Army Corps of Engineers certification in relation to the Rivers and Harbors Act.

“The comment period on the DEIS closed on February 25, 2019 and FERC is presently engaged in drafting the Final Environmental Impact Statement,” said Gulf LNG.

The Gulf terminal was originally owned by US pipeline company El Paso and later acquired by Kinder, which has sold 50 percent of the project to US equity funds.

The Pascagoula terminal is located next to the Bayou Casotte Navigation Channel and already includes a five-mile send-out pipeline and two LNG storage tanks, each with a capacity of 160,000 cubic metres.

It is interconnected to several downstream pipelines, including Transco, Florida Gas Transmission, the Destin Pipeline and the Gulfstream Natural Gas Pipeline from where feed-gas can be transported for processing and export from Pascagoula.

This is Kinder's second LNG export project and it is currently completing the Elba Island export plant near Savannah in the state of Georgia.

In addition to the storage tanks and pipeline, the terminal has a single dock facility that is currently permitted to receive LNG carriers of up to 170,000 cubic metres capacity and is designed to handle even larger vessels.

An earthen berm would also be constructed extending from the northeast to the southeast boundaries of the terminal expansion site. This would be connected to new segments of the storm surge protection wall on the coast.

The project is 50 percent owned by Kinder Morgan subsidiary Southern Gulf LNG Company, while 30 percent is held by Thunderbird LNG, a unit of the Blackstone Group fund managers.

The remaining 20 percent is held by Gulf LNG Holdings, comprising Arc Logistics Partners and Lightfoot Capital Partners equity funds.

Kinder Morgan said it expected to provide about 40 percent of the volumes for current and future LNG and pipeline exports as it remained on schedule to brings its own small-scale liquefaction facility on stream in the first quarter at Elba Island in Georgia and eventually a second plant in Mississippi.

Elba Island is an existing import terminal being transformed into an export plant to produce an initial 2.5 million tonnes per annum of LNG.

Kinder Morgan, based in Houston, had earlier given a start-up date for Elba Island as the fourth quarter of 2018.

The Elba Liquefaction Project is being built at a cost of just $2 billion and will have feed-gas needs equivalent to around 350 million cubic feet per day.

“The project is supported by a 20-year contract with Shell,” said Kinder in a presentation to investors following its fourth-quarter results.

“The first of 10 units is expected to be placed in service at the end of the first quarter of 2019, with the remaining nine units to come online throughout 2019,” it added.

Kinder’s partner in the joint venture, called Elba Liquefaction, is the US equity fund EIG Global Energy Partners, which holds 49 percent. Elba Liquefaction will own the liquefaction units and other ancillary equipment.

“Certain other facilities associated with the project are 100 percent owned by Kinder Morgan,” said the company.

“The newly constructed Elba Express Modification Project is now in service, adding upstream compression facilities on the Elba Express pipeline to provide feed gas for liquefaction,” explained Kinder.

The company stated that natural gas is critical to the American economy and to meeting the world’s evolving energy needs.

“Objective analysts project US natural gas demand, including net exports of LNG and exports to Mexico, will increase from 2018 levels by 32 percent to nearly 119 Bcf/d by 2030,” it said.

“Of the natural gas consumed in the US, about 40 percent moves on Kinder Morgan pipelines, and roughly the same percentage holds true for US natural gas exports,” added Kinder.

“Kinder expects future natural gas infrastructure opportunities through 2030 will be driven by greater demand for gas-fired power generation across the country (forecast to increase by 15 percent), net LNG exports (forecast to increase almost five-fold), exports to Mexico (forecast to rise by 39 percent), and continued industrial development, particularly in the petrochemical industry,” it said.

The existing LNG terminal on Elba Island is about eight miles upstream from the mouth of the Savannah River. It was first authorized by the Federal Energy Regulatory Commission in 1972 as an import facility.

The transformation project to turn the terminal into a liquefaction plant began in November 2016.

Kinder and two equity funds are also making progress on receiving FERC permits to transform the existing Gulf LNG import terminal in Pascagoula in Mississippi into an export plant.

The proposed Gulf LNG export facility would consist of two Trains, each with capacity of about 5 MTPA.

“The Gulf Liquefaction Company, Gulf LNG Energy and Gulf LNG Pipeline units are scheduled to have their final Environmental Impact Statement in April 2019, and the final decision for issuance of the FERC certificate is expected in July 2019,” said Kinder.

Natural gas transport volumes on Kinder’s pipeline system for the fourth quarter were up 4.5 Bcf/d compared with the same three months in the previous year.

“The group’s success mirrors the record-breaking year enjoyed by the natural gas sector as a whole. US natural gas demand rose to 90 Bcf/d from 81 Bcf/d in 2017, an 11 percent increase,” it said.

“This increase was driven by higher throughput on El Paso Natural Gas due to additional Permian capacity sales, on Colorado Interstate Gas due to growing Denver-Julesburg Basin production, and on Tennessee Gas Pipeline due to power demand and projects placed in service,” said the company.

Kinder said its Texas intrastate networks also contributed to a rise in transport volumes due to higher demand from shippers serving Mexico and the Texas Gulf Coast industrial markets, and on Natural Gas Pipeline Company of America due to cold weather early in the quarter, increased Permian Basin receipts and power demand.

US pipeline and storage company Kinder Morgan said it expected the first Train of its Elba Island LNG export plant near Savannah in Georgia to come on stream in the first quarter of 2019 while the company was also benefitting from the feed-gas needs at other liquefaction ventures.

US pipeline company Kinder Morgan and two equity funds are making progress on receiving permits to transform the existing Gulf LNG import terminal in Pascagoula in Mississippi into an export plant.