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Pangea Taking 'Bite-Sized' Approach to LNG Export

Pangea LNG (North America) Holdings LLC, a relative latecomer to the North American liquefied natural gas (LNG) export race, is approaching regulators, and the market, with a smaller, more scalable project on the Texas Gulf Coast that the company's CEO, an LNG veteran, says has better odds of coming to fruition than some mega project competitors.

"It's just more bite-sized," Pangea CEO Kathleen Eisbrenner told NGI. "It's more financeable, and it's easier to find the offtake all in one go...With the mega projects being as large as they are, there's more risk of cost and schedule overruns. I think there's room for everybody."

Pangea's plan has several advantages, Eisbrenner said, including the company's majority ownership by a leading Korean shipbuilding company, which will help keep construction costs down.

Also, unit costs for the Pangea projects will benefit from the scalability afforded by floating LNG (FLNG) facilities, she said. "I think most of the other projects around the world are scaling up to get, in theory, unit cost down," Eisbrenner said. "And I just don't think, as a practical matter, it really works that way in reality once you're operating and you've realized you're not operating at 94% reliability all year long for all five trains or three trains or whatever.

"So by keeping this to 3-4 million tonnes per train and being able to independently choose to build one and then the second, to me is a big competitive advantage."

Pangea recently filed an application with the U.S. Department of Energy (DOE) seeking authority to export up to 8 million tonnes per annum (398.5 Bcf/year) of LNG to all current and future countries with which the United States has a Free Trade Agreement (FTA) (see NGI, Dec. 3). Last Wednesday, Pangea filed an application at DOE for non-FTA authorization for exports from the company's project at the Port of Corpus Christi, TX.

Separately last week, Magnolia LNG LLC, a unit of Australia's Liquefied Natural Gas Ltd., filed an FTA application for a similarly sized project to be developed in Louisiana (see related story).

"Filing our FTA and non-FTA applications with DOE are major initial milestones for this project," said Pangea Project Director John Godbold. "Our design optimization is ongoing, and that work will be sufficiently complete so that we can begin the FERC prefiling review process in the Spring of 2013."

Eisbrenner, a top LNG executive from El Paso Corp., Excelerate Energy and Royal Dutch Shell plc (see NGI, Sept. 15, 2008), is not troubled that numerous others have announced projects in the Lower 48 and Canada. The world is net short of LNG, or will be, and there's room for multiple projects, she said.

Eisbrenner has been involved in the development of multiple FLNG regasification projects, including Pangea's Tamar Project, which would export LNG from the Tamar and Dalit fields in the eastern Mediterranean, 60 miles offshore Israel. This project is further along than Pangea's Corpus Christi effort and will provide design, engineering and other learnings for the Texas project, Eisbrenner said.

In Corpus Christi, the project's storage will most likely be floating as opposed to land-based, Eisbrenner said. The floating component could even include liquefaction. "We're actually in the concept selection phase to make that determination now," she said. "We're evaluating everything from full FLNG to, in the extreme, full land-based, although [our] 550 acres [at the Port of Corpus Christi] doesn't quite give us enough, we don't think, for that, and that's not the direction that we're going. And then we've got all kinds of ideas in between that are pretty exciting."

Pangea is based in The Woodlands, TX, and is a unit of Pangea LNG B.V., whose shares are owned by South Korea's Daewoo Shipbuilding & Marine Engineering (DSME) (70%), D&H Solutions AS (20%) and NextDecade International Cooperatief U.A. (10%). NextDecade International is a Netherlands-based cooperative and has six individual investors from the United States, Spain and The Netherlands, including Eisbrenner, her husband and former industry colleagues.

The Korea connection gives Pangea an advantage on project costs, Eisbrenner said, adding that the project's floating component will benefit from budget and schedule discipline by being built in Korea.

"That's why I think we will have lower unit cost than any of the other, either brownfield or greenfield, projects because somewhat like the re-gas [terminal development] experience, I think the industry, once they realize the power of the Korean shipyard to control budget and to control schedules, is a powerful driver of success. That's why we partnered with DSME and D&H on both of these projects in fact."

Pangea partner DSME has constructed a number of floating regasification vessels, and each of these has capacity to handle about 3-4 million tonnes, so they would line up nicely with a similarly sized liquefaction project, she said.

By building much of the project in Korea, Pangea will have the option of proceeding with construction while it awaits a permit from the Federal Energy Regulatory Commission. Eisbrenner did this when she was at El Paso and developing a Gulf of Mexico floating regasification project while awaiting a permit. "...[I]f the regulatory process gets delayed...we can't do anything on site, of course, without full approval, but we can take what risks we choose in South Korea," she said.

Another advantage to having a South Korean partner is the fact that the country recently secured an FTA with the United States, which was authorized by U.S. lawmakers late last year. "We'll leverage that as much as makes sense," Eisbrenner said.

Pangea has finalized a letter of intent with Statoil North America Inc. that could lead to Statoil taking up to a 50% equity stake in the Corpus Christi project and utilizing up to half of its liquefaction and export capacity, Pangea said in its DOE filing. Depending on the needs of its partners and how the market evolves, a portion of the Corpus Christi project could be available for the spot market.

"We've got a real strong partner with a real strong balance sheet who may well have appetite for flexibility, as we do," Eisbrenner said. "I would love to have our Corpus Christi project partially merchant. That would be my personal ambition. But we'll do what we need to do to get it built and financed, etc."

Eisbrenner said the Corpus Christi project could proceed even without authorization to send LNG to non-FTA countries. Pangea was ready to make its non-FTA filing when the DOE released NERA Economic Consulting's report on its study of the macroeconomic impacts of exporting LNG, which was largely favorable for would-be exporters (see NGI, Dec. 10). "...[T]hat gave us, we think, more information about what they're looking for in a non-FTA application..." Eisbrenner said.

Not surprisingly, she was pleased by NERA's findings that LNG exports would benefit the country's economy under virtually every scenario considered.

"...I really had no insight into what direction they'd take, and I think they took a very balanced view of things and did their homework," she said. "And I think they're right. I think ultimately, let markets decide what trade should take place."

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