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Freeport LNG Train 1 Commissioning OK’d by FERC

FERC has approved commissioning the first train at the Freeport liquefied natural gas (LNG) export terminal in Southeast Texas, further signaling the impending growth expected in U.S. export capacity between now and the end of 2019.

The Federal Energy Regulatory Commission in a filing Monday authorized Freeport LNG Development LP, FLNG Liquefaction LLC, FLNG Liquefaction 2 LLC and FLNG Liquefaction 3 LLC to commission Train 1 “and common area utilities at both the liquefaction and pretreatment facilities.”

Freeport’s first three trains are scheduled to enter service sequentially between 3Q2019 and 2Q2020 after being delayed earlier this year.  The three trains are designed with the capacity to liquefy roughly 700 MMcf/d.

About 13.4 million metric tons/year (mmty) of capacity has been contracted under use-or-pay tolling agreements with a coterie of mostly Asian customers, including Osaka Gas Co. Ltd., Jera Energy America LLC, BP Energy Co., Toshiba Corp. and SK E&S LNG LLC.

In June, Freeport LNG Marketing LLC announced an agreement with Singapore-based Trafigura Pte Ltd. to sell the global trading firm 0.5 mmty from the facility on Quintana Island near Freeport, which is about 60 miles south of Houston.

The Freeport LNG approval comes as FERC Cheniere Energy Inc. to introduce feed gas and refrigerants to continue commissioning activities at Sabine Pass Train 5 in Louisiana. Earlier this month FERC issued Cheniere authorization to allow feed gas to begin at Train 1 of the Corpus Christi Liquefaction LLC facility, the first planned export project in Texas, signaling that the terminal could produce the first commissioning cargo before year's end.

Based on NGI’s analysis of FERC filings and company documents, 2019 is shaping up to be a pivotal year for U.S. LNG expansions. NGI estimates that total LNG sendout capacity is on track to rise to 3.3 Bcf/d (3.6 Bcf/d assumed intake) by the fourth quarter before surging to 8.2 Bcf/d (9.0 Bcf/d assumed intake) by 4Q2019. The additional capacity is expected to come from trains starting up at Freeport, along with facility start ups at Elba Island, Cameron LNG, Corpus Christi, as well as the fifth train at Sabine Pass.

RBN Energy LLC recently estimated that currently operating facilities and those with final investment decisions (FID) in hand and under construction could eventually account for 9.4 Bcf/d of U.S. LNG sendout.

That’s “more than one-ninth of total U.S. gas production today, not even accounting for the usual 10% losses in the liquefaction process,” RBN analyst Housley Carr said. “And that’s just the beginning. At least another dozen and a half liquefaction/LNG export projects are in various stages of pre-FID, pre-construction development.”

Expected demand growth from LNG exports is also a key driver of growing U.S. pipeline capacity into the Gulf Coast region, where many of the terminals under development are located.

Complicating the bullish case for U.S. LNG has been escalating trade tensions with China. Morningstar Commodities Research analyst Matthew Hong recently warned of potential short-term impacts on U.S. LNG exports to the growing Chinese market, with potential long-term effects on the next wave of U.S. projects still looking to reach FID.

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