LNG

The Freeport LNG export plant on Quintana Island in Texas has asked regulators to place its third liquefaction Train into service by April 30 as the US Gulf Coast export buildout continues amid the global supply glut and economic slump.

Freeport LNG Chief Executive Michael Smith said he was hopeful of signing sufficient deals with buyers as the Quintana Island facility in Texas slowly expands, though suggested the second wave of plants may face difficulties 

However, Smith stated in an interview with pricing agency S&P Global Platts that the market had completely changed in 2019.

The Freeport project comprises four Train in all and the plant shipped its first cargo from the second liquefaction Train in mid-December 2019.

The cited a list of challenges, including record low prices and weaker than expected demand in Asia, oversupply concerns and the recent coronavirus outbreak in China.

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

“I don't think there's going to be a lot,” Smith said of additional sanctioned US capacity. 

“The margins for everyone have come down,” he stated.

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

The first phase construction at Freeport will see the building of one more Train, bringing to total to three and 15 million tonnes per annum 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 have been added. The Train 4 project will be the second phase of construction.

“We don't have anything signed up. Until we do have something signed, no one is going to hear from us,” said Smith about the Train 4 project at his Texas plant.

Freeport's current target is for a final investment decision on Train 4 by mid-2020 and a start-up scheduled for 2024.

“We believe once we have the requisite capacity sold to reach our financing hurdles, we can close a transaction within a six-week time period, eight on the outside,” explained the CEO.

Smith declined in the interview with S&P Global to specify what range of prices Freeport was discussing with prospective buyers, though he said it was similar to the deals announced by other developers.

“We don't believe we are wasting our time,” said Smith. However, he stated that circumstances had changed since the first wave buildout of the six US plants currently operating. 

Engineering firms McDermott International and partners Chiyoda Corp. of Japan and the US Zachry Group said the first liquefaction Train at the Freeport LNG project on Quintana Island in Texas has reached the final commissioning stage.

This includes the introduction of feed gas into Train 1 of the natural gas import facility that is being transformed into a liquefaction and LNG export plant after several project delays.

“We are extremely proud of the Freeport LNG project team for reaching this major milestone at this unique LNG production facility,” said Mark Coscio, McDermott's Senior Vice President for North, Central and South America.

“First of its kind in the US, with the largest electric-motor driven refrigeration compressors, the Freeport LNG facility will significantly improve the energy export capabilities we have in the US, and McDermott is pleased to be part of its development from the ground up,” added Coscio.

Once Train 1 is fully operational, it will have the capacity to produce more than 5 million tonnes of LNG per annum.

Zachry Group, as the joint venture lead, engaged McDermott for the Pre-FEED in 2011, followed by FEED works to support the early development stage of the project.

Later Chiyoda joined the partnership and the joint team provided engineering, procurement and facility construction as well as commissioning and initial operations for the project.

It includes three liquefaction Trains with 15 MTPA of capacity, a second loading berth and a 165,000 cubic metres full containment LNG storage tank.

The orginal Freeport terminal was completed in 2008 with one berth and two storage tanks, each of 160,000 cubic metres capacity.

The Freeport project is led by oil and gas entrepreneur Michael Smith, who is Chairman and Chief Executive of the development company.

Freeport received regulatory approval in 2019 to build an additional Train 4 and permits from the US Department of Energy for the export of Train 4 volumes to Non-Free Trade Agreement countries, opening the way for marketing.

The Freeport Train 4 will take overall output to 20 MTPA. About 13.5 MTPA of this capacity has been contracted under 20-year tolling agreements to Japanese utilities Osaka Gas and JERA Co. Inc., BP of the UK, South Korea’s SK E&S, while a fifth deal with Toshiba Corp. was off-loaded in June 2019 by the troubled Japanese company to French energy major Total.

There is also a sixth deal, a sales agreement for 500,000 tonnes per annum contracted to international commodities firm Trafigura in the form of a three-year accord starting in 2020.