BackgroundTen years ago – Ocean Shipping Consultants – wrote a new report on the growing LNG market. In the report we highlighted that the USA was one of the major future LNG import markets. At the time, there were five operating import terminals, with a potential for a further 40+ import terminals in the planning and development stages.
One year later, the market had completely changed. The development of the shale gas revolution meant that the US potentially had too much gas. Such was the extent of the new gas production, that the country had the potential to compete with Russia and Qatar in the world of natural gas. The scale of its natural gas resources meant that it could become the largest LNG exporter in the world. All of a sudden, the USA was now seen as a major producer of LNG. The country’s LNG import faculties suddenly became idle. Such was the influx of cheap shale gas that it took a while for the sector to recognise the potential. Huge sums of capital had been poured into regasification facilities that were not needed, meaning that regasification plants needed to be turned in to liquefaction plants instead.
The US Department of Energy (DoE) is planning to speed up approvals for LNG exports to non-free trade agreement (FTA) countries in Latin America and the Caribbean. Despite there being a potential oversupply of LNG through to the 2020s, there is still much anticipation for future LNG exporting projects in the US.
In total, projects that are either up and running or planned and under construction account to 82.45 mta – which puts the US second behind Qatar in terms of total LNG exports. Here are some of the main projects.
US LNG Export Projects
Sabine Pass LNG, Cheniere
Total volume – 24mta
Sabine Pass was one of the first to recognise and organise itself to become an export facility. By the end of 2017, owner Cheniere had completed four of the planned six trains, with the third train (4.5mta) competed in March 2017. Train five is already under construction. So far, the company has 19.75mta contracted from trains one to five. By the end of 2017, some 180 LNG cargoes have been loaded from Sabine Pass.
Cove Point, Dominion Energy
Total volume – 5.25mta
Dominion Energy expects Cove Point LNG production project to start at the end of 2017. All cargoes are contracted on a 20-year supply deal to Indian-based GAIL and to Japan’s Sumitomo and Tokyo Gas.
Elba Island LNG
Total volume – 2.5mta
Construction of the of the export facility started in 2016, with the aim to start production in 2019. The entire output is contracted to Shell.
Coprus Christi LNG
Total volume – 22.5mta
The Cheniere-back facility is due to launch its first 4.5mta train in 2019, with the second train starting in 2020. There are plans for up to five trains, subject to FID on trains three, four and five. The first two trains are fully contracted to buyers including, Pertamina, Gas Natural Fenosa, Endesa, Iberdrola, Woodside, EDF and EDP from Portugal.
Total volume – 13.2 mta
The Quintana Island facility will have three trains, and an estimated US$14bn investment from the project partners, CB&I, Zachry ad Chiyoda. The partners have also applied to the FERC to build a fourth train that could produce 5.1mta. Freeport LNG has contracted 13.4mta under use-or-pay liquefaction tolling agreements with Japan based JERA, Osaka Gas and Toshiba, with BP Energy and SK E&S LNG of South Korea.
Future LNG projects 2020-2025In addition, there are a further 14 projects of varying sizes that are currently planned to come on stream between 2020-2025. These projects alone stand for 192.15mta. It is a fair guess that not all the projects will get backing and built – but even if half of them do make FID – there could be approx. 100mta of LNG entering the market by 2025. Some of the larger projects include:
Total volume – 26mta
Tellurian Investments backed projects aims to finalise sales and purchase agreements soon. Led by Cheniere founder Charif Souki – he says that Driftwood will shatter a business model based on longer-term, fixed rate contracts. Driftwood LNG will offer cargoes at US$8/mbtu ‘for the initial 7mta for contracts of up to eight years, from 2023’.
Golden Pass LNG
Total volume – 15.6mta
Jefferson County-based Golden Pass has the backing of Qatar Petroleum, ConocoPhilips and ExxonMobil. The US$10bn project is the cornerstone of Qatar’s plan to build a global LNG portfolio, split between domestic and international production. FERC has approved the venture.
Rio Grande LNG
Total volume – 27mta
NextDecade claims to have contracted non-binding sales agreements for 30mta with buyers in Asia and Europe. The US$20bn Rio Grande export project, based at Brownsville in Texas won approval from the US DoE to export to FTA countries. One prospective taker is Ireland, where the company is working with the John Frederiksen backed - Flex LNG and the port of Cork. A floating storage and regasification unit (FSRU) is expected to be located in the port.
Monkey Island LNG
Total volume – 15.75mta
Southern California Telephone Co subsidiary Monkey Island LNG hopes to reach FID on its Cameron parish project in Louisiana by the end of 2020. The company has agreed a 20-year, fixed-price agreement to source natural gas and has secured export approval to ship LNG to FTA countries. The proposed project comprises of three trains of 4mta each. Monkey Island LNG claims to have agreements for a third of its output, from interests including China-base terminal owner Jovo Group.
Once planning consent has been given, it takes four to five years to build a new liquefaction plant. So, we see that the US will produce a huge amount of LNG in the next 5-8 years.
What does this mean for the LNG fleet?
All this extra capacity coming to market will require additional LNG vessels. According to Tradewinds there are 442 LNG carriers, with 97 on order. The ‘Rule of Thumb’ suggests that it take two ships per million tonnes. If the US increases total LNG output to 100mta – then there is the possibility that 200 new LNG carriers will be required. This means that in five years the LNG newbuilding market could become significantly busier than it is today.
This also means that if additional capacity comes on stream from Qatar, Australia or Russia then there could be a squeeze on LNG shipyard capacity in the not too distant future.
So, the challenge is to work out which of the many projects in the US will actually make it all the way to LNG production and which will be a footnote in the history of the LNG sector in the country.
In ten years' time we will look back and see which of these projects actually made it. You never know, with the pace that things are changing in the energy sector currently, we could be looking back in a year's time to see how wrong (or right!) we got it.
Source – LNG World Shipping / Tradewinds
Energy Shipping Specialist
David Bull has over 17 years’ experience of the maritime sector having worked for Lloyd’s List, Drewry and Braemar Seascope shipbrokers. As a Principal Consultant and Project Manager at OSC, David’s main work lies in providing analysis, market insight for due diligence, economic feasibility and trade and traffic forecasting models. His main focus is on the energy sector. He specialises in services for the LNG, offshore and liquid bulk markets. David has a BSc in Geography and holds a CFA Investment Foundation certificate.
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