LNG

Freeport LNG has provided an update on its re-start plants stretching into the first quarter of 2023  because of repairs and production and operational changes.

The US Federal Energy Regulatory Commission said it was awaiting further information from the Freeport LNG plant in Texas for the process to begin for a partial re-start during November and a full ramp-up in production by March 2023.

The FERC said in a statement that it required further information to allow the facility to come back on stream in November as planned.

Freeport was shut down on June 8 due to a pipeline explosion and the company has said that it expected the plant to return to at least partial service by mid-November and for supplies of 2.1 billion cubic feet per day to be received by pipeline.

The Quintana Island facility must also follow more safety orders issued by the Pipeline Hazardous Materials Safety Administration (PHMSA).

The PHMSA and the FERC have been discussing with Freeport LNG management “ongoing damage assessments, repair work plans and plans for restart” since the June 8 events.

Time for review

“FERC reiterates the need for Freeport to provide the status and schedule of implementing the findings, recommendations, and lessons learned resulting from the root cause investigation and assessments as soon as possible to allow sufficient review time,” the regulator has said.

Freeport LNG said it aimed to restore more than 85 percent of pre-fire processing capacity in November and to ramp-up the facility to 100 percent of capacity by March 2023.

“We continue to progress our work towards achieving the November restart of our liquefaction facility,” said Freeport LNG in a statement.

“That work includes completing the final repair and restoration efforts, completing required work plans and obtaining the necessary regulatory approvals required before the facility's restart,” added Freeport LNG.

The June 8 incident occurred in pipe racks that support the transfer of LNG from the facility's LNG storage tank area to the terminal's dock facilities located on the north side of the dock basin.

None of the liquefaction Trains, LNG storage tanks, dock facilities nor the LNG process areas were impacted and there were no injuries reported.

Expansion plan

Freeport LNG was founded by billionaire Michael Smith who is Chairman and Chief Executive. When the explosion occurred, Smith and his team were planning for an expansion from 15 million tonnes per annum of output from three Trains to 20 MTPA with the construction of a fourth Train.

The plant is the joint second-largest liquefaction facility in the US, from seven existing facilities, along with Cameron LNG and Corpus Christi LNG, and is surpassed in output only by the six-Train plant at Sabine Pass in Louisiana, owned by Cheniere Energy.

Freeport LNG's main customers include Japan’s largest importer JERA Co. Inc., the Japanese utilities Kansai Electric and Osaka Gas as well as South Korean company SK E&S and buyers in Europe.

During the first quarter of 2022 before the accident, the Freeport plant exported 55 cargoes mainly to import terminals in Europe and North Asia.

The US Freeport LNG plant in Texas now estimates that the resumption of partial liquefaction operations following the June 8 fire will be early October 2022 and with a year-end target for the resumption of full production.

McDermott International of the US was awarded the main engineering contract from Australian LNG plant operator Santos for the offshore Bayu-Undan infill well that serves the Darwin liquefaction export plant in the Northern Territory.

McDermott said the contract is for subsea, engineering, procurement, construction and installation (EPCI) work for the Phase 3C project in the Timor Sea, located about 310 miles (500 kilometres) off the northwest coast of Darwin and 124 miles (200km) off the southeast coast of Timor-Leste.

“McDermott has a strong track record of delivering complex subsea projects in the Asia Pacific,” said Mahesh Swaminathan, McDermott's Senior Vice President for the region.

“We will continue that tradition as we demonstrate our execution expertise and safety excellence throughout this project,” added Swaminathan.

The Bayu-Undan field is one of Timor-Leste's largest gas fields and Santos become operator in May 2020 after buying out the stake of US major ConocoPhillips.

Preliminary work on the Phase 3C project commenced in May 2021 and the scope will be managed by McDermott's office in Perth, Western Australia.

“The McDermott scope involves a tieback of a single in-field well to existing facilities re-using existing flexible flowline with a new umbilical and certain infrastructure,” explained the Houston, Texas-based company.

Santos, as operator of the Bayu-Undan Joint Venture, has already started the new infill drilling programme in the field in the waters of Timor-Leste.

The programme was given a final investment decision in January 2021 and comprises three production wells for additional natural gas and liquids reserves, extending field life as well as production from the offshore facilities and the Darwin liquefaction plant.

The Adelaide-based company said the wells would be drilled using the “Noble Tom Prosser” jack-up rig, with first production expected in the third quarter of 2021.

Santos believes the infill drilling programme will add over 20 million barrels of oil equivalent gross reserves and production at a low cost of supply and importantly extend the life of Bayu-Undan and the jobs and investment that rely on it.

Santos noted that more than 400 Timorese are currently working on Bayu-Undan activities and this will make an important economic contribution to Timor-Leste.

The President of the Timor-Leste National Petroleum and Minerals Authority, Florentino Soares Ferreira, has said the Santos-led venture was important in the history of Timor-Leste.

“It will mark the first drilling campaign in the Bayu-Undan field as Timor-Leste offshore waters, following ratification of the Maritime Boundary Treaty (MBT) between Timor-Leste and Australia,” stated Soares Ferreira.

Santos as operator has a 43.4 percent stake in Bayu-Undan. The remaining stakes are held by South Korea’s SK E&S (25 percent), Inpex Corp. of Japan (11.4 percent), Italy’s Eni (11 percent), while Japanese utilities JERA Co. Inc. and Tokyo Gas own 6.1 percent and 3.1 percent respectively.

BW Offshore, the Norway-listed floating production units provider for oil and gas, has been awarded an Australian contract worth US$4.6Bln by LNG operator Santos for the Barossa gas field to provide feed-gas for the Darwin liquefaction plant.

Santos Ltd., the operator of the Gladstone LNG plant in Queensland and Darwin LNG in the Northern Territory, said that its Barossa LNG feed-gas project offshore northwest Australia remained on-track for a final investment decision in the first half of 2021 and with key Japanese customer interest.

Australian LNG plant operator Santos has signed a binding long-term LNG supply and purchase agreement (SPA) for the Barossa gas project with Mitsubishi Corp., the  prominent Japanese sector player with stakes in the US Cameron LNG plant in Louisiana and LNG Canada in British Columbia.

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.

Air Liquide Engineering & Construction, a unit of France's industrial gases company, has signed a new contract with LNG importer, the POSCO Group and the leading steel producer in South Korea, to design and build an Air Separation Unit (ASU) at Pohang.

Italian energy company Eni has retained investment bankers to find buyers for its Australian natural gas, LNG and oil assets as it aims to concentrate on other markets in the years ahead such as the Middle East and Mozambique in southeast Africa.

Executives said the investment banking arm of New York-based Citgroup Inc. was seeking interested parties in the Australian assets.

Eni has offices in Perth, Western Australia, and in Darwin, in the Northern Territory as well as Dili, in Timor-Leste where it also owns assets.

In Australia, Eni owns and operates the Blacktip gas field, supplying gas to Australia’s Northern Territory for power generation and industrial uses.

In the Joint Petroleum Development Area between Timor-Leste and Australia, Eni holds a 40 percent shareholding in the Kitan Oil Project, and an 11 percent interest in both the Bayu-Undan Gas Condensate Project and the Darwin LNG plant, which liquefies feed-gas from the Bayu-Undan fields in the Timor Sea.

The Kitan oil field is located 170 kilometres offshore Timor-Leste coast and 550km northwest of Darwin.

Eni also has a 100 percent interest in permits WA-33-L and WA-69-R in the Bonaparte basin offshore Australia’s Northwestern coast where the the Blacktip gas field and the Penguin gas discovery are located.

The Blacktip gas field is located in a water depth of around 50 metres. The facilities are comprised of an unmanned production platform, an offshore pipeline of around 110 kilometres connected to the Yelcherr Onshore Gas Plant in the Northern Territory.

Eni is led by Chief Executive Claudio Descalzi who was reappointed recently to his CEO post for a third term, and analysts said he would now embark on a restructuring of assets to help the company navigate the current slump.

Australian company Santos agreed to sell 25 percent of the Darwin LNG facility and the Bayu-Undan gas field off Northern Australia to South Korea’s SK E&S for US$390 million after agreeing to buy-out the interests of ConcocoPhillips in the Northern Territory and the Timor Sea.

The Eni assets in northwest Australia and the Timor Sea could be worth more than US$900 million.