Cove Point Joins List of LNG Export Front-Runners

By Thomas Overton

San Diego, April 3, 2013 — Despite all the sound and fury surrounding potential U.S. exports of liquefied natural gas (LNG), industry observers have consistently suggested the market is unlikely to support more than three to four operating terminals. In the race to nab one of those coveted spots, Dominion’s Cove Point facility near Lusby, Md., has joined the short list of front-runners who have been able to contract for their projected output capacity.

Only one terminal, Cheniere’s Sabine Pass project, has been approved by the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC) for export to non-free trade agreement countries. Cheniere—clearly doing its best to race as far ahead of the competition as possible—has thus far signed contracts for the entire capacity of its first five liquefaction trains and is exploring the potential for a sixth.

Two other projects, both expansions of existing LNG import terminals, have also secured contracts for projected output. The Freeport LNG project in Freeport, Tex., has contracts in place for both of its planned trains, while Sempra’s Cameron LNG project in Hackberry, La., has contracts for the output from its three trains.

On April 1, Dominion announced that it had signed contracts for all of its projected capacity, about 5.25 million tons per annum (mtpa). U.S. affiliates of Japan’s Sumitomo Corp., and GAIL (India) Ltd. have each contracted for half the output. With those agreements in hand, Dominion has contracted with IHI E&C International and Kiewit for the engineering and construction, and is filing its export application with FERC.

Collectively, these four projects have contracted for almost 45 mtpa of LNG, or about 5.9 Bcf/d. This figure is important because the consensus of industry analysts I’ve talked to is that the global market is unlikely to support much more than 6 Bcf/d of U.S. exports. The more LNG the U.S. pushes out, the more global prices will start to converge, and eventually the costs of export and lower LNG prices worldwide will make U.S. LNG too expensive to be competitive.

What that means is that the window for U.S. exports projects is closing, if it hasn’t closed already. For obvious reasons, long-term export contracts make obtaining financing for these freakishly expensive projects much easier. But with so much business already locked up, it seems less and less likely the also-rans will be able to do catch up.

Of the remaining seven export projects that FERC is currently considering (see chart below), only two—Trunkline LNG in Lake Charles, La., and Elba Island in Ga.—have any infrastructure in place at all (in both cases, idle regasification terminals the owners hope to convert to export). All of the others exist only on paper.

It’s still anyone’s bet what the DOE is going to do about approving these projects, but I’m prepared to go out on a limb at this point and suggest we’re going to see the projects without contracts start to fade away as the financing dries up. That may make the DOE’s decision to allow exports—one I and other observers expect—easier to swallow.

—Thomas W. Overton is POWER’s gas technology editor. Follow Tom on Twitter @thomas_overton.

 

LNG Export Projects Awaiting FERC Approval

Existing Import Terminal, Contracts Signed

Freeport LNG, Freeport, Tex.

Cove Point LNG (Dominion), Md.

Cameron LNG (Sempra), Hackberry, La.


Existing Import Terminal, No Contracts in Place

Trunkline LNG, Lake Charles, La.

Elba Island, Ga.

 

Previously Permitted Import Site, No Infrastructure

Cheniere, Corpus Christi, Tex.

Jordan Cove Energy Project, Ore.

 

Applications Only

Oregon LNG, Astoria, Ore.

Magnolia LNG, Lake Charles, La.

 

Floating LNG

Excelerate Liquefaction, Lavaca Bay, Tex.