Developers of the Calcasieu Pass liquefied natural gas (LNG) export project on the Gulf Coast scored a $1.3 billion investment as Stonepeak Infrastructure Partners extended its reach into the North American LNG business, the companies announced Tuesday.
Stonepeak committed the equity investment for the 10 million metric tons/year (mmty) Calcasieu Pass project in Cameron Parish, LA, bringing the total committed capital to fund its construction and the continued development of Venture Global’s 20 mmty Plaquemines LNG and 20 mmty Delta LNG facilities to $2.2 billion.
The latest investment also extends Stonepeak’s reach in the LNG sector. In 2016, the private equity firm invested in Golar Power Ltd., a 50/50 joint venture with floating LNG technology expert Golar LNG Ltd., for various LNG-based transportation and downstream projects.
“We are long-term believers in the increasing importance of LNG as a global source of greener, cheaper energy,” Stonepeak senior managing director Jack Howelland said. “Calcasieu Pass will be a critical provider of LNG to its blue-chip customer base.”
Venture Global LNG Co-CEO Mike Sabel touted Stonepeak’s experience in the LNG sector, and praised its team for bringing “a great depth of LNG knowledge and a track record of investing in exceptional infrastructure projects throughout North America.”
Calcasieu Pass — which is fully contracted with 20-year offtake agreements with Royal Dutch Shell plc, BP plc, Edison SpA, Portugal’s Galp, Repsol SA and Poland utility PGNiG — is expected to begin delivering Lower 48 gas to the global market in 2022. The project secured FERC approval in February.
“Calcasieu Pass is already significantly advanced in both site construction and module manufacturing, owing to the $855 million previously raised to date,” Venture Global Co-CEO Bob Pender said. The company is finalizing the balance of its Calcasieu Pass financing.
Meanwhile, Venture Global expects to secure Federal Energy Regulatory Commission and Department of Energy authorizations for Plaquemines LNG in the third quarter and commence construction shortly thereafter.
Last month, the Arlington, VA-based developer asked to initiate the pre-filing process for a federal environmental review of the proposed Delta LNG project, which would consist of a liquefaction facility with 20 mmty nameplate capacity and 24 mmty peak capacity, as well as the Delta Express Pipeline to feed supply to the facility. Delta LNG is targeting first deliveries by December 2023, with full start-up of Phase 1 operations by November 2024.
Earlier this year, the company said that because of customer demand, it would expand its process equipment supply agreement with Baker Hughes, a GE Company to accommodate up to 60 mmty of production at its LNG facilities.
Morgan Stanley served as the exclusive financial advisor for Venture Global LNG on the recent transaction, and Latham & Watkins LLP served as Venture Global’s legal counsel. Simpson Thacher served as legal counsel for Stonepeak. As part of the investment, Stonepeak managing director James Wyper will join the board of Calcasieu Pass.
NextDecade Corp. continues to progress on its proposed Rio Grande LNG project, with the developer signing two contracts with Bechtel Oil, Gas and Chemicals (Bechtel) for the engineering, procurement and construction (EPC) of the first phase of the Brownsville, TX, project, the company said Tuesday.
The first phase of Rio Grande includes three liquefaction trains, two 180,000 cubic meter storage tanks and two marine berths totaling $9.565 billion. Each liquefaction train is expected to have capacity up to 5.87 mmty, which would generate an EPC cost of approximately $543/ton for the first three trains.
That would be the lowest cost/ton greenfield project built on the Gulf Coast under a fully wrapped lump-sum turnkey EPC contract, according to NextDecade. The contracts include cost, schedule and performance guarantees.
“Throughout our competitive EPC process, Bechtel has demonstrated a steadfast commitment to safety, reliability and efficiency,” said NextDecade’s Ivan Van der Walt, senior vice president of engineering and construction. “Bechtel’s track record building LNG projects on the U.S. Gulf Coast is unrivaled. Our global LNG customers, feed gas suppliers, and other stakeholders can have the utmost confidence in the on-time and on-budget delivery of our Rio Grande LNG project.”
Under the terms of the deal, Bechtel could commence construction of the first phase of Rio Grande LNG with either two or three trains. It will perform limited notice to proceed activities from June 1 until January 1, 2020 and has agreed to accept up to $15 million in NextDecade common stock in consideration for certain activities.
Bechtel has a long history of developing such contracts for LNG projects around the world. In the last four years alone, the company has built 14 large-scale LNG production trains.
The contracts are another positive milestone ahead of NextDecade’s final investment decision, which is expected by the end of September. Rio Grande received its environmental impact statement from federal regulators in April, and a final authorization is expected by July 25.
Also in April, the developer announced its first long-term supply deal for Rio Grande, a 20-year, 2 mmty agreement with a subsidiary of Royal Dutch Shell plc.
While second-wave LNG export projects like Calcasieu Pass and Rio Grande continue to progress ahead of an expected surge in global demand, the near-term outlook for the LNG market remains weak as the remaining summer contracts are struggling for price support, according to Energy Aspects.
The price spread between the Japan Korea Marker and Dutch Title Transfer Facility (TTF) has narrowed to less than a dime/MMBtu for the remaining summer contracts, which marginally favors sending U.S. cargoes to Asia rather than Europe, the firm said. However, the arb window between TTF and U.S. benchmark Henry Hub is still wide open.
“With arb decisions already made for 2Q19, any further TTF softening is only going to impact flow decisions for 3Q19,” Energy Aspects analyst Trevor Sikorski said.
Leading U.S. LNG provider Cheniere Energy Inc. indicated earlier this month that so far, the weak global market has not impacted its business. The Houston-based developer has continued to deliver all of its spot cargoes as scheduled and does not expect to see any future cancellations based on its “long-term forecast for natural gas here in America”, which is range-bound in the mid- to high $2 range, Cheniere CEO Jack Fusco said.
Energy Aspects said that the TTF winter strip has been more resistant to falling due to concerns around whether Russia will be contractually able to flow gas through Ukraine in 1Q2020. “With winter also carrying the risk of cold weather, near-record wide contango at the TTF means the TTF-Henry Hub arb windows for peak winter remain wide open.”
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