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.