New Fortress Energy Inc. said it had few issues in the second quarter signing up customers for liquefied natural gas (LNG) and power generation assets that it is developing in Brazil, where energy demand has set records this year.
NFE said it inked eight sales agreements for 5.8 million gallons/day of LNG to underpin import terminals and power generation projects under development along Brazil’s coast.
The company gained a foothold in Brazil earlier this year when it acquired Golar LNG Partners LP and Hygo Energy Transition Ltd. in a deal valued at $5 billion. NFE took over an operational import terminal and power plant. It is also developing similar assets to the north and south of the Sergipe facility.
South America has imported significant amounts of LNG this year, particularly in Brazil. Cargo arrivals have hit record levels amid a historic drought that has left hydropower reservoirs depleted and created power shortages.
“What that does in Brazil is that means you have to compensate with thermal dispatchable power and so basically all the natural gas power plants, and frankly some of the oil and distillate fuel power plants, turn on at that point and you shift basically all the domestic gas production to power,” said NFE managing director Andrew Dete. He spoke during a conference call last week to discuss second quarter results.
NFE said hydro reservoir inflows are 50% below the 20-year average in the country, while spot power prices in the region are 10 times higher than the 20-year average. The company also said when gas power plants are dispatched in Brazil, total gas demand can increase by up to 65%. Gas production in the region has also declined, which is creating opportunities for NFE’s new assets.
“So you go from kind of needing a little bit of imports to cover your supply/demand balance to needing a ton of imports,” Dete said.
Record LNG Deliveries
Brazil saw its highest-ever level of LNG in June, when imports clocked in at 657,000 tons, according to market research firm Kpler. This compared with zero cargoes in June 2020 and 184,000 tons in June 2019.
NFE said it has signed deals with a refinery, a large industrial customer and smaller buyers in Brazil. The company expects the three terminals it has under development to come online next year.
NFE, which operates similar assets in the Carribean, during 2Q2021 also started commercial operations at the Port of Pichilingue in Baja California Sur, Mexico. The 1.8 million gallons/day receiving terminal and 135 MW gas-fired power plant are expected to be fully operational by October.
The company again pushed back the start-up date to sometime in 3Q2021 for its 2.4 million gallons/day import terminal and 300 MW gas-fired power plant in Nicaragua. Those assets were expected to come online by June after delaying start-up late last year following construction and permitting delays.
Average LNG sales volumes jumped again in the second quarter with more assets in operation as the company has ramped up its business after going public in 2019. Average sales were 1.5 million gallons/day during the quarter, up from 978,000 gallons/day in the year-ago period.
NFE reported a second quarter net loss of $1.7 million (minus 3 cents/share), compared with a net loss of $166.5 million (minus $2.40) in 2Q2020. While the company reported record quarterly revenue of $223.8 million, expenses were higher as the business continued to grow.
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