LNG

Enbridge Inc, the North American pipelines company, has signed an accord with two equity fund-linked firms and MPLX LP, a unit of Marathon Petroleum, to form a venture to develop, construct and operate natural gas pipeline and storage assets connecting Permian Basin supply to growing LNG and US Gulf Coast demand.

The joint venture will be owned by the WhiteWater and I Squared firms with a 50.6 percent stake, MPLX with 30.4 percent and Enbridge with 19.0 percent.

There assets base is widespread and strategic across the Texas gas hubs.

The assets include 100 percent interest in Whistler pipeline, a 450-mile, 42-inch intrastate pipeline transporting natural gas from an interconnect with the Waha Header in the Permian Basin to Agua Dulce in Texas, near to the starting point of the proposed Rio Bravo pipeline and LNG plant.

NextDecade project

They will also own a 100 percent interest in the Rio Bravo pipeline project comprising 137 miles of new 42-inch and 48-inch pipelines transporting natural gas from the Agua Dulce supply area to NextDecade's Rio Grande LNG export project in Brownsville, Texas.

The joint venture will additionally own a 70 percent interest in the in Agua Dulce-to-Corpus Christi (ADCC) pipeline, a 40-mile, 42-inch proposed intrastate pipeline designed to transport 1.7 billion cubic feet per day of natural gas from the terminus of the Whistler pipeline in Agua Dulce to Cheniere Energy’s Corpus Christi LNG export facility.

The ADCC pipeline is expected to be in-service in the third quarter of 2024 and is expandable up to 2.5 Bcf per day.

Enbridge, based in Calgary, Alberta, noted that around 98 percent of capacity in the venture is contracted under long-term, take-or-pay contracts with an average contract length greater than 10 years.

The final part of the venture is a 50 percent interest in Waha Gas Storage, a 2.0 Bcf gas storage cavern facility, with additional topside infrastructure capable of making injections and withdrawals.

“Upon closing of the transaction, Enbridge will contribute its wholly-owned Rio Bravo pipeline project and US$350 million in cash to the joint venture, and will fund the first US$150M of the post-closing capex to complete the Rio Bravo pipeline project,” said a statement.

Investment grade

“Enbridge will receive a 19 percent equity interest in the joint venture and retain a 25 percent economic interest in the Rio Bravo pipeline project, subject to certain redemption rights of the joint venture partners.” it added.

The counterparties in the venture are mostly investment grade and include leading operators in the Permian Basin.

“This is a great way to enhance our super-system approach, bringing energy supply to places where it is needed most and providing last mile connectivity to domestic and export customers,” said Cynthia Hansen, President of Gas Transmission and Midstream at Enbridge.

Enbridge will be contributing its Rio Bravo pipeline project, which will extend the joint venture's current infrastructure to serve LNG and other customers on the US Gulf Coast.

Enbridge's share of the post-closing capex to complete the Rio Bravo pipeline project will be 100 percent of the first US$150M and thereafter proportionate to its aggregate economic interest in that project.

“The transaction optimizes our investment capacity by increasing the efficiency of our capital,” said Pat Murray, Chief Financial Officer of Enbridge.

“We will begin receiving immediate cash flow and will share in future growth opportunities,” Murray stated.

“Having access to new Permian natural gas infrastructure enhances and increases the visibility of our medium-term growth outlook, while being accretive to our balance sheet,” he concluded.

The joint venture agreement is expected to close in the second quarter of 2024, subject to receipt of required regulatory approvals and the satisfaction of other customary closing conditions.

The Freeport LNG plant on Quintana Island in Texas was unable to produce LNG on September 14 as all three liquefaction trains were knocked off stream by power issues caused by tropical storm Nicholas, which hit the Gulf Coast..

The Freeport plant is located in Brazoria County, south of Houston, and widespread power outages were reported in the county.

“Nicholas moved slowly across the Houston metropolitan area,” said the US National Oceanic and Atmospheric Administration’s Hurricane Center.

“Life-threatening flash floods are expected across portions of the Deep South during the next couple of days,” added the statement.

The storm made landfall along the coast west of Quintana where Freeport LNG is sited.

A statement from Freeport said the situation was continuing to be assessed and no other damage was reported at the plant,

The Freeport facility is the only one in the US that uses exclusively electric motors instead of natural gas turbines to drive the liquefaction compressors.

In addition to the three Trains currently constructed, it has proposed adding a fourth, though it has yet to sanction the investment until commercial support is finalized.

Maintenance

Hours before the storm hit, the Freeport facility was operating normally and continuing to produce LNG.

Before the current temporary outage, Freeport had just returned one liquefaction Train to service in the first week of September after a brief spell of maintenance.

Analysts note that high demand for US LNG from nations like China, Japan and South Korea as well as Brazil in South America has meant very high utilization rates at all six US liquefaction terminals.

The Freeport operating company, whose Chief Executive is the energy entrepreneur Michael Smith, produces around 15 million tonnes per annum of LNG.

It has use-or-pay liquefaction tolling agreements for most of the output from the three Trains 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 US Golden Pass LNG export project on the Gulf Coast, owned by Qatar Petroleum and ExxonMobil, has requested immediate authorization from the Federal Energy Regulatory Commission to begin the work covered in the latest part of its implementation plan.