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Parallax Energy Buying Louisiana LNG Project

Houston-based Parallax Energy is buying Louisiana LNG Energy LLC. The proposed export project to be acquired would be the second "mid-scale" liquefaction and export project undertaken by Parallax this year and would complement the first with design and engineering similarities.

Louisiana LNG would be sited in Plaquemines Parish in southeast Louisiana on the east bank of the Mississippi River between New Orleans and Venice, LA. Louisiana LNG began the Federal Energy Regulatory Commission approval process last July and has applied for permits to export liquefied natural gas (LNG) to both free trade agreement (FTA) and non-FTA countries (see Daily GPI, Sept. 3, 2014).

The first Parallax project, Live Oak LNG, was announced earlier this year and would be sited in Calcasieu Parish, on the west bank of the Calcasieu River in southwest Louisiana near Lake Charles (see Daily GPI, Feb. 3). The facility is being designed for average production of 5.2 million tonnes per annum (mtpa) and would include two storage tanks and marine loading berth. The start-up date is anticipated for late 2019.

One project is good but a second, nearly identical project is even better, said Parallax Chairman Martin Houston, a former COO of BG Group.

"The addition of Louisiana LNG to our company sets the Parallax strategy firmly into motion. We have an innovative, efficient and cost-effective way to safely produce what customers want: smaller amounts of LNG that they can purchase incrementally.

"One of our core tenets is 'design it once and build it many times.' Louisiana LNG has a great head start and we are fortunate they selected the same technology and world-class partners. We will be working with Bechtel on pre-engineering design and Chart [Industries] for process design for both Louisiana LNG and Live Oak LNG. In addition, both projects have great locations with excellent pipeline supply and deep water access.

"We're going to build exactly the same, and I mean exactly the same. We can benefit from having done the engineering once and using it more than once," he told NGI.

Louisiana LNG, which Parallax is acquiring from its founding partners for an undisclosed price, is ahead of Live Oak in the permitting process, but it is only a 2 million mtpa project. Houston wants a larger project. “We're just thinking about the choreography here,” he said of the application process.

No contracts have been signed, but Houston said Parallax has been making progress in talks with potential customers of the Live Oak project. Parallax is open to tolling agreements and also to delivering LNG to customers FOB. Houston said he does not yet know which project will be constructed first. But he wants to construct two projects of 5.2 mtpa each, in two tranches, each with 2.6 mtpa.

“We genuinely believe that we can reduce the manufacturing cost of LNG, which is going to be important in a low-price environment,” said Houston, who is bullish on natural gas and on global LNG.

“There's never been a better time to be in the LNG industry, in my view,” he said. “It's become more dynamic; it's become more fragmented. The barriers to entry are reduced...If I go back to 1993 when I was involved in Atlantic LNG...If I thought 22 years ago that 22 years later I'd be prosecuting a project bigger than that on my own personal balance sheet, it would have been almost unimaginable.

“But that's what's happening. The barriers to entry are low, as we've seen with the plethora of projects. Of course the question is which of those projects will survive. And a long tail of 700 million tonnes of announced LNG projects on a global basis is going to be more than the industry needs. That of course has to be winnowed out.”

Parallax has a sister company called Millennial Energy Partners which currently is investing in non-operated properties, mainly oil. But there is plenty of value in natural gas, Houston said. "We like gas in the right addresses, and we have a little bit of it in [Millennial's] fund five, but we're very focused on both unconventional and conventional oil. Conventional oil has showed itself to be extremely robust at these prices. It's really about what generates the best value..."

But will Millennial be buying natural gas reserves, too?

"Ask me that in a couple of months time..." Houston said. "I don't think there's ever been a better time to buy gas in the ground in America. I think that's happening. But we have a limited capacity. We've got to digest what we've just done, and I want to focus right now on delivering these projects. That is my No. 1 task."

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