FERC on Monday approved a proposal by Cheniere Energy units Sabine Pass Liquefaction LLC and Sabine Pass LNG LP to site, construct and operate facilities to liquefy domestic natural gas for export to markets worldwide. It is the Commission's first authorization of a project that would export liquefied natural gas (LNG) from production resources within the United States.
The Federal Energy Regulatory Commission (FERC) approval under Section 3 of the Natural Gas Act [CP 11-72-000] comes after U.S. Department of Energy (DOE) authorization for the companies' plans to export the commodity for a 20-year period to all Free Trade Agreement (FTA) and non-FTA nations (see Daily GPI, May 23, 2011). Other projects seeking authorization to export to non-FTA countries are having to wait until DOE further evaluates the market impact of exports (see Daily GPI, March 27a).
Sabine Pass LNG and Sabine Pass Liquefaction propose to construct and operate liquefaction and related facilities that would enable the companies to liquefy and export up to 2.2 Bcf, or 16 million metric tons per year, of domestically produced gas. The project would be sited at Sabine Pass' existing LNG import terminal in Cameron Parish, LA.
The project would be built in two stages, each consisting of two LNG process trains with a liquefaction capacity of an estimated 4 million metric tons per year. Each train would contain gas treatment facilities, gas turbine-driven refrigerant compressors, cold boxes and heat exchangers for cooling and liquefying natural gas, waste heat recovery systems, fire and gas detection and safety systems, among other facilities. The project would involve the permanent use of an additional 191 acres within the existing Sabine Pass terminal and would use five existing LNG storage tanks at the site. No additional marine facilities are required.
The project would enable the terminal to receive and process an average of 2.6 Bcf/d, including fuel and inerts such as carbon dioxide and water. Sabine Pass would continue to provide import, regasification and re-export services, as requested, to customers under existing terminal use agreements. The applicants said there is no physical limitation to simultaneous operation of the existing regasification and proposed liquefaction capabilities.
"However, the concerns expressed by the American Public Gas Association [APGA] that the exportation of domestically produced natural gas will have adverse implications for domestic consumers of natural gas, for U.S. energy supply, and for national security, all relate directly to impacts associated with the exportation of the commodity natural gas, rather than to any impacts that would be associated with the export facilities used to accomplish the exports," FERC said in the order.
According to FERC, the Secretary of Energy has not delegated to the Commission any authority to approve or disapprove the import or export of the commodity itself. Nor is there any indication that the secretary's delegation authorized the Commission to consider the types of issues raised by APGA as part of the Commission's public interest determination, thus duplicating and possibly contradicting the Secretary's own decisions.
FERC said the project can be constructed and operated safely and with minimal environmental impacts. It adopts FERC staff's recommendations in its December 2011 Environmental Assessment of the project and will require the applicants to adhere to the 55 mitigation conditions detailed in the report (see Daily GPI, Dec. 30, 2011).
The Commission ordered the companies to complete construction and have the proposed facilities available for service within five years of the date of the order.
Also on Monday, Cheniere Energy Partners LP said eight financial institutions have stepped up to help finance the project.
The joint lead arrangers assisting with arrangement of up to $4 billion of debt facilities are The Bank of Tokyo-Mitsubishi UFJ Ltd., Credit Agricole Corporate and Investment Bank, Credit Suisse Securities (USA) LLC, HSBC, J.P. Morgan Securities LLC, Morgan Stanley, RBC Capital Markets, and SG Americas Securities LLC. Proceeds are to be used to pay for costs of development and construction of the liquefaction project, to fund the acquisition of the Creole Trail Pipeline from Cheniere Energy Inc. and for general business purposes.
"Obtaining financing is one of the last steps to complete before proceeding with the construction of the first two liquefaction trains being developed at the Sabine Pass LNG terminal," said Cheniere CEO Charif Souki. "We have engaged an experienced group of financial institutions as our core banking group and look forward to completing the financing for the project in due course."
Cost before financing for the first two trains of the liquefaction project is estimated at $4.5-5 billion and is expected to be funded from a combination of debt and equity.
On the contracting front Cheniere has been making steady progress. It has inked four contracts to supply LNG to units of BG Group, Spain's Gas Natural Fenosa, Korea Gas Corp. (Kogas) and Gail (India) Ltd. for a total of 16 million metric tons per year capacity of the 18 being developed at the terminal (see Daily GPI, Jan. 31).
On Monday FERC also vacated without prejudice an order authorizing Jordan Cove Energy Project LP to site, construct and operate an LNG import terminal in Coos County, OR, and the related Pacific Connector pipeline from the terminal to a point near the Oregon-California border. Jordan Cove had notified FERC in February that due to market conditions it no longer intended to implement an authorization to construct and operate an import terminal. In the same filing, Jordan Cove sought pre-filing status to explore the feasibility of a liquefaction export project that would be built and operated at the same site. FERC granted that status [PF 12-7-000] (see Daily GPI, March 27b).
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