LNG

US pipeline company Kinder Morgan and its equity fund partners have made more regulatory progress in their development of the Gulf LNG export project proposed at the site of the existing import terminal at Pascagoula in Mississippi.

KBR Inc., the US energy and LNG engineering company said it was awarded a preliminary engineering and design contract by Mexico Pacific Ltd (MPL) for a US-led midscale LNG liquefaction and export project at Puerto Libertad on the Pacific coast of Mexico.

Under the terms of the contract, KBR will provide pre-front-end engineering and design work and cost estimates for the project.

This work will be performed by KBR utilizing the ConocoPhillips Optimized Cascade liquefaction technology, leveraging the midscale LNG joint development work previously announced by KBR.

With offices in Houston, Texas, MPL is a venture comprising DKRW Energy Sonora Holdings and Aecom Capital, a New York-based equity fund that invests in energy and infrastructure projects.

MPL has additional Mexican regulatory permits for 12 million tonnes per annum of output and proposes the initial construction of up to four mid-scale modular processing Trains, each producing 1 MTPA.

“We are excited to be a part of this Mexico Pacific Limited LNG project and to deliver innovative LNG technology solutions for our customers,” said Farhan Mujib, KBR President for Hydrocarbons Delivery Solutions.

“We believe midscale LNG projects have an important part to play in the global LNG market,” added Mujib.

The Puerto Libertad project site is contained within 1,100 coastal acres and the harbour depths are in excess of 20 metres and capable of accommodating the largest LNG carriers.

“We look forward to working with an LNG industry leader in KBR, and continuing our efforts to provide a world class project with best in class delivered pricing for our Asian buyers,” said Josh Loftus, President of MPL.

The KBR contract continues a broader competitive process with FEED expected to start in mid-2019.

The US Department of Energy’s Office of Fossil Energy approved MPL’s application in September 2018 to export 1.7 billion cubic feet per day via existing cross-border natural gas pipelines to be liquefied at the Puerto Libertad plant.

The pipelines include the Kinder Morgan Sierrita Gas Pipeline, which extends to the US-Mexico border near Sasabe in Arizona.

From MPL’s facility, which would be sited on the shore of the Gulf of California adjacent to Puerto Libertad, the LNG could be delivered to other markets in Mexico or to nations with a Free Trade Agreement with the US.

MPL President Loftus formerly worked with global accountants and consultants Ernst & Young where he was a business development manager in the energy sector in Houston.

He previously held several senior roles with the General Electric Company, including at GE Oil & Gas.

Loftus received a BA in economics and business administration from the University of Missouri and an MBA from the University of Notre Dame in Indiana.

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.