The global liquefied natural gas (LNG) market advanced, slowly, on a number of fronts last week.
The parties behind the Golden Pass liquefied natural gas (LNG) export project in Texas struck a framework agreement for potentially all of the project’s capacity; Energy Transfer Partners LP (ETP) said it would soon have a decision on its Trunkline LNG export application; and China National Oil Corp. (CNOOC) stepped up for a bigger stake in BG Group’s Queensland Curtis LNG (QCLNG) in Australia.
Golden Pass Products LLC and its backers, Qatar Petroleum International (QPI) and ExxonMobil Corp., struck a framework agreement for the sale of potentially the full 15.6 million tonne per annum (mtpa) output of the proposed Golden Pass LNG export project in Sabine Pass, TX. The arrangement also provides shipping and sales opportunities to existing and new markets, including leveraging the project sponsors’ long-term arrangements for international imports via the United Kingdom’s South Hook facility, Golden Pass said Thursday.
“This agreement sets out a highly competitive commercial blueprint for Golden Pass Products, with a commitment that builds on the unique combined strengths of QPI and ExxonMobil throughout the global downstream LNG value chain,” said Golden Pass Products President Bill Collins.
In a recent report, Wood Mackenzie analyzed the value of U.S. LNG optionality to QPI. LNG from Golden Pass could be baseloaded into the UK, backfilling Qatari LNG that is being re-directed east, to Asian markets, the firm said (see NGI, April 29). “In addition, the combination of QPI’s underutilized regasification capacity in the UK and Qatar’s excess LNG shipping capacity could provide a sunk-cost economic advantage of some US$1-1.50/MMBtu over other proposed U.S. LNG export projects for European supply,” said Wood Mackenzie’s Noel Tomnay, head of global gas research.
Golden Pass Products would invest $10 billion to build the liquefaction facility. It has received U.S. Department of Energy (DOE) authorization for exports to free trade agreement (FTA) countries and is awaiting DOE approval to export to non-FTA countries. Golden Pass Products said it is preparing for the Federal Energy Regulatory Commission permitting process and anticipates pre-filing soon. Golden Pass Products was formed by affiliates of QPI and ExxonMobil; the Sabine Pass terminal was commissioned as a regasification and import facility in 2010 with its first commissioning cargo coming from Qatar.
Separately, executives at ETP said they were seeing the light at the end of the permitting tunnel for the Trunkline LNG Gulf Coast export project. They said the project could have authorization to send liquefied U.S. gas to non-free trade agreement (FTA) countries within 60-90 days as pressure is building for the U.S. Department of Energy (DOE) to decide on the next one or two projects in the applicant queue.
“Everybody knows that with the growth in shales, we need to export,” said ETP COO Mackie McCrea. “I believe our government is recognizing that, and since we’re next in line [at DOE], we are very optimistic that within a short period of time, within 60-90 days, that we will receive our non-FTA permit, so it’s a project that we’re looking forward to and we’re moving forward and are very excited about it. There’s indications that we’re getting from Washington that they may move quicker on at least the next one or two decisions around non-FTA permits.”
DOE has been evasive about when it will act on non-FTA applications. The agency has approved just one project, Cheniere Energy Inc.’s Sabine Pass, before it called a halt on others, pending further study.
McCrea said Thursday the company expects to file its resource report for the project by the end of this year and expects to have Federal Energy Regulatory Commission approval of the project within a year after that. Customer contract talks are under way. ETP should be able to disclose details “in the very near future.”
ETP CEO Kelcy Warren said the liquefied natural gas (LNG) export project “is about as fat as you can get for an MLP [master limited partnership] when you look at the amount of capital required and the time distance between spending large amounts of capital and actually creating distributable cash flow dollars to your unitholders. It’s just not a perfect fit for us…” ETE likely will exit the project at some point, he said, adding that management is “intrigued” by financing arranged by other LNG export projects, particularly by Cheniere Energy.
And in the LNG breadbasket of Australia, CNOOC has agreed with BG Group to take an additional stake in the QCLNG project for A$1.93 billion. CNOOC also agreed to take an additional 5 mtpa of LNG from BG Group. The deal will make BG Group the largest supplier of liquefied natural gas (LNG) to China, the company said. CNOOC also is to reimburse BG for its share of spending on the project since Jan. 1, 2012.
“These agreements extend our strong relationship with CNOOC, which spans not only LNG but also exploration offshore China and production in the UK Continental Shelf through participation in the large Buzzard oil field,” said BG Group Chief Executive Chris Finlayson. “As a foundation partner in QCLNG, CNOOC was among the first to recognize the value and strategic importance of this world-first project — a vision that is now coming to fruition as we move towards first LNG in 2014. Combined with the 3.6 mtpa LNG sale agreement signed with CNOOC in 2010, BG Group now has total committed volumes to China of 8.6 mtpa, which will make the group the largest supplier of LNG to the world’s fastest growing energy market.”
China is the world’s fastest growing energy market, Finlayson said. The country is seen as the next prize in the global LNG end-user portfolio.
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