The U.S. Department of Energy (DOE) has extended through 2050 the long-term liquefied natural gas (LNG) export license of the Energía Costa Azul (ECA) facility that was sanctioned for the west coast of Mexico last month.
ECA was one of seven LNG export projects for which DOE granted an extension following a policy change implemented by the Trump administration earlier this year.
In addition to ECA, DOE extended export terms for the Golden Pass facility under construction in Sabine Pass, TX, as well as the Texas LNG project proposed for Brownsville, TX, the proposed Magnolia and Driftwood LNG terminals in Louisiana, and the Delfin floating LNG project offshore Louisiana.
ECA has DOE authorization to import and liquefy U.S.-sourced natural gas for export from Mexico. Equity stakes of 41.7% each are held in the project by Sempra LNG and Infraestructura Energética Nova (IEnova), while offtaker Total SE recently acquired the remaining 16.6%.
The ECA project, one of multiple liquefaction terminals envisaged for Mexico’s west coast, would allow U.S. gas exports to bypass the Panama Canal and reach Pacific demand markets faster and more cheaply.
The project’s geographic advantages explain why it was sanctioned this year in spite of the havoc wreaked by Covid-19 on the global LNG market, RBN Energy LLC analyst Jason Ferguson said in a blog post last week.
He noted, however, that getting gas into the area “can sometimes be tricky,” citing that gas prices in the U.S. Desert Southwest and SoCalGas border regions have traded at premiums of about $0.20/MMBtu to the Louisiana and Texas Gulf Coast markets this year.
Mexico Pacific Limited LLC’s (MPL) CEO Doug Shanda told NGI recently that commercial momentum for MPL’s LNG export project in Mexico’s Sonora state is building, citing that, “Asian countries don’t have indigenous resources and they’re really concerned about energy security.”
LNG vessels have been waiting longer to pass through the Panama Canal in recent weeks, tightening an already stretched shipping market and creating logistical issues for U.S. LNG exports at a time when global gas prices are moving higher.
‘Securing a Future’ for Exports
In an effort to strengthen and promote domestic natural gas exports, the Trump administration in July extended export authorizations to non-free trade agreement (FTA) countries through 2050.
“It is important for DOE to do everything to assure a long-term future for U.S. LNG exports, which will continue to meet global energy security and emissions reduction goals,” said Acting Under Secretary of Energy Steven Winberg.
From 2011 until the policy change was implemented in July, the DOE limited non-FTA export licenses to 20 years. The DOE is required under the Natural Gas Act to authorize FTA export licenses because they are presumed to be in the national interest. It may deny or limit licenses for countries without U.S. trade agreements. With the policy change, the DOE automatically grants all new non-FTA licenses through 2050 and extends existing non-FTA licenses through 2050 if the respective license holders apply.
The latest announcement follows 10 similar export license extensions that the DOE completed in October. The moves come as U.S. LNG exports are booming. Feed gas deliveries to terminals have hit record highs over the last week, exceeding 11 Bcf/d as the nation’s liquefaction trains run at or near peak capacity. Global natural gas prices are at some of their highest levels in the last two years as cargo loadings catch up to winter demand, supply disruptions add to seasonality and shipping constraints pressure the market.
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