Freeport LNG delays Train 4 final investment decision until 2021

Tuesday, 30 June 2020
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The US Freeport LNG plant at Quintana Island in Texas has delayed its 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,” said Freeport LNG.

“As such, we do not expect to reach FID on Train 4 this year,” said the company whose Chief Executive is energy entrepreneur Michael Smith.

“Given we are a brownfield expansion, if market conditions improve, we can easily be in a position to start construction by mid-2021,” explained the company.

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.

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

“The margins for everyone have come down,” he stated, and that was before the oil price crash in mid-March 2020.

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