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Global Limits to Decide Number of U.S. LNG Exports, Sempra Exec Says

No more than six U.S. liquefied natural gas (LNG) export projects are likely to be operating by 2021 as limited amounts of skilled workers and financial resources for developing the costly liquefaction terminals will serve as a restraint on how many get built, according to Sempra Energy's top LNG executive.

Octavio Simoes, president of Sempra LNG, told NGI that he expects Sempra's proposed Cameron LNG export project on the Gulf Coast at Hackberry, LA, will be the next one to start construction later this year. FERC approval to start construction could come as soon as June 19, Simoes said.

Two other projects -- Cove Point and Freeport -- may also get the Federal Energy Regulatory Commission’s (FERC) OK this year, but many of the other proposed projects are "nowhere near the completion stage,” he said.

"As I have told you before, I still think the limitation will not be on the number of permits the DOE [Department of Energy] issues or how many FERC applications get completed," Simoes said. "What will limit these projects is the availability of money and human resources. There are not that many construction firms that are capable of doing these projects.

"There is also a limited number of engineers and skilled construction workers in many regions, and there is a limited appetite for financing these kinds if projects, so all of these things combined will create a natural bottleneck for getting a lot of projects done."

Simoes said that in the time frame now in discussion -- through 2021 -- there will perhaps be a total of five or six U.S. export projects, including the Cheniere Energy Inc. Sabine Pass project now under construction and Cameron. "That number may eventually turn out to be too much," he said.

"There has been a lot of talk, but right now there is only the Cheniere project in construction. We are on the road to being the second one in construction, and Cove Point and Freeport trains Nos. 1 and 2 may get there this year."

He said he discounts all of the talk about the many proposed U.S. export projects, emphasizing that the U.S. projects are competing for a limited number of critical resources globally. "Clearly, there are only about six really qualified contractors [for LNG projects] worldwide," Simoes said. "It becomes a project risk to go with a 'B Team', let alone a 'C' or 'D' team."

Over the longer term, as worker resources expand and there are more top engineering procurement construction (EPC) contractors, LNG as a global commodity could expand even further, Simoes said.

"As the pool of talent expands, not just for engineers, but on the operations side, too, the limiting factor for export facilities may become production capability for key component manufacturers." he said. "These factories [for cryogenic heat exchangers, compressors, turbines, etc.] don't invest in parallel manufacturing facilities so they can produce 20 at the same time; therefore the production is staggered, and we are assigned slots

"So the limiting factor today may be people, but five years from now it may be the numbers of production slots available for key components of the export facilities. It is like the [LNG] ship manufacturers; they only have a limited number of dry docks from which to work so they can only build so many ships at a time."

Simoes cautioned that in the LNG business there will always be bottlenecks. "That's why export projects of this nature just don't spring up like mushrooms on a rainy day."

The Environmental Protection Agency has asked FERC for a 30-day extension to complete its review of the Environmental Assessment for the Cove Point liquefaction project (see related story). 

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