LNG

(Donna Price/American Press)

Six local liquefied natural gas projects were recently ranked among the top 10 most likely to become a reality out of dozens being planned nationwide.

The report, published by Oil & Money, names local project Magnolia LNG second most likely to reach final investment decision. The other Southwest Louisiana projects that made the cut were Cheniere Energy’s Sabine Pass expansion project, Tellurian’s Driftwood LNG, Cameron LNG’s expansion project, Delfin, and Lake Charles LNG.

The planned facilities are part of a second wave of export terminals expected to meet the growing global demand for natural gas over the next decade. The first wave ended in 2015, after a handful of U.S. projects reached final investment decision.

“There really is a distinct separation between those first five projects and the rest of the projects that are planned,” said Magnolia COO John Baguley.

While the first wave created a temporary oversupply in the market, delaying many new projects, demand is expected to outpace supply in the 2020s, Baguley said. A recent study by Shell predicted that demand would grow 4 percent to 5 percent each year between 2015 and 2030.

Magnolia LNG

Magnolia was Oil & Money’s No. 2 pick because of how advanced it is in the development process, according to the report.

The project, backed by Australia’s LNG Ltd., has approvals from both the Federal Energy Regulatory Commission and the Department of Energy, and its primary construction contract in place. All it’s waiting on is buyers for the offtake before making final investment decision.

“We were very happy to be listed as number two,” Baguley said. “I was a little surprised we weren’t listed as number one.”

The report says Magnolia’s unique design will allow it to produce LNG in smaller wedges. The facility will produce up to 8 million tons per year using four liquefaction trains, each with an annual capacity of 2 mtpa — a smaller train size than most. 

“Nobody in the world today wants to buy large volumes of LNG all at once,” Baguley said. “Today the buyers are looking at 1 to 2 million tons at a time, and so they like the fact that our train size aligns with their purchasing aspirations.”

Baguley said he’s “a little puzzled” by the lack of urgency among buyers. Now would be the ideal time to make commitments, he said, since commodity prices are low and demand is expected to increase by the time construction would wrap up on a new project.

“I really don’t understand what everybody’s waiting for,” he said. “The buyer’s market just doesn’t seem to go forward. It’s a curious situation.”

He expects that once the first buyers make commitments, the rest will follow.

Cheniere

Third on the list is Cheniere’s Sabine Pass facility’s sixth and final train — the industry term for units where natural gas is cooled to a liquid for transport. 

Cheniere, the only LNG terminal operating in the contiguous U.S., is developing an export facility next to its existing import facility in Sabine Pass. Its first three trains are operational, with a fourth expected to be completed this year and a fifth in 2019. Each can produce up to 4.5 mtpa.

 Like Magnolia, the sixth train is fully approved and marketed; it just needs buyers.

Existing projects such as Cheniere have an advantage over brand-new projects because all the infrastructure is already in place, reducing costs and time, said company spokesman Eben Burnham-Snyder.

Because Cheniere began operating in February 2016 on time and on budget, he said, it can also bring confidence to new customers.

Cheniere was also ranked No. 1 on the list for its expansion project at the company’s Corpus Christi, Texas, location, where construction is already underway.

Driftwood

Sixth on the list is Tellurian’s Driftwood LNG. It’s the youngest of the 10 LNG facilities being developed in Southwest Louisiana, having announced plans to build in the region in 2016.

The report notes that the project is led by “industry veterans” Charif Souki, former Cheniere Energy CEO, and Martin Houston, former BG executive. Company spokesman Joi Lezcnar said Driftwood leaders have been involved in constructing 20 percent of the liquefaction capacity worldwide. 

“This experience and partnership has allowed us to move very quickly, seamlessly, and with confidence that we know what we’re doing and can deliver on our promises to the market and the community,” Lezcnar said.

The project is awaiting federal approval, expected by the middle of next year. It intends to sign a construction contract with Bechtel this fall and reach final investment decision in 2018.

Designed for 26 million tons per year,  Driftwood is over three times as large as Magnolia. The company is open to unconventional ways of selling LNG, such as  allowing shorter contracts. 

“We are listening to what the customers want: smaller amounts of LNG and shorter contracts. However, we are open to all types of scenarios,” Lezcnar said. “Our model anticipates change in the LNG industry, and the winners will be those companies who are operationally low-cost and commercially flexible.”

Cameron LNG

Seventh on the list is Cameron LNG’s Trains 4 and 5, set to follow its first three trains under construction in Hackberry. 

At 4.5 mtpa each, the trains have full approval but will be affected by a six-month delay in construction until 2019 announced earlier this month by developer Sempra Energy, according to the report.

The company declined to comment.

Delfin 

Delfin, a floating LNG terminal with a 13 mtpa capacity, will consist of four liquefaction vessels instead of trains. It’s planned for about 50 miles off the coast of Cameron Parish.

The project “has the virtue of being relatively inexpensive,” and its floating design allows for “incremental startup,” the report says. 

Bill Daughdrill, health and safety director at Delfin, said the liquefaction vessels can be fully constructed at a dedicated yard and shipped in later, cutting down construction time. 

Delfin will also save money by not having to dredge and build complex mooring facilities, he said. And when exports begin, ships won’t have to travel up the shipping canal.

“Taken together, Delfin believes all of these project features provide significant competitive advantages for our project,” Daughdrill said.

Delfin has acquired the major permits needed to begin construction, including key approvals from the Maritime Administration and the Energy Department. Daughdrill said it’s “actively evaluating shipyards to construct the floating LNG liquefaction vessels.” 

He said he expects the company to select the construction facility and make final investment decision in 2018.

Lake Charles LNG 

Tenth on the list is Shell’s Lake Charles LNG, with a 15 mtpa capacity. Shell delayed final investment on the project in August 2016, although it has gotten approval from both FERC and the DOE. 

The report notes that Shell already has “significant exposure to U.S. LNG and appears wary about adding more.” A review of the project is underway by Shell and other industry specialists.

Shell was unable to comment because its offices were damaged in Hurricane Harvey.

More from this section

WELSH - Every Tuesday afternoon a group of French speaking residents gather at the McBurney Memorial Library with coffee in hand.

  • Updated

KINDER - The Coushatta Casino Resort continues to be a key economic engine for Allen Parish and Southwest Louisiana, generating more than 2,000 jobs which have become the driving force in the local economy, according to the tribe’s leader.