4 LNG projects to watch in 2016

Susan L. Sakmar's picture
Susan L. Sakmar, Independent consultant, author and adjunct law professor, University of Houston Law Center
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In the dynamic LNG world, there is always something interesting going on with the multi-billion dollar projects being planned around the world. Here are just a few of the projects to watch for in 2016.

Cheniere’s Sabine Pass LNG - United States: Cheniere’s Sabine Pass Liquefaction terminal (featured image) is in the homestretch with Train 1 in the commissioning process and expected to ship the first cargo in January 2016. Cheniere’s export terminal represents a remarkable turn of events since Cheniere also built the first LNG import terminal when it was expected that the US would be a major LNG importer. But shale gas changed the game and now America is expected to become one of the world’s largest LNG exporters with Cheniere leading the way.

Cheniere’s Sabine Pass project includes six liquefaction trains, which will each have production capacity of approximately 4.5 MTPA. The trains are being developed in three stages with Trains 2-4 expected to be completed on a 6-9 month staggered basis after completion of Train 1.

For the first four LNG trains, 16 of the 18 mtpa has been contracted to third party, foundation customers on a long-term FOB basis under sale and purchase agreements (SPAs). Foundation customers include BG Group, Gas Natural Fenosa, KOGAS and GAIL. Train 5 has been contracted with foundation customers Total and Centrica. Any excess capacity not sold under long-term SPAs to foundation customers is available for Cheniere Marketing to purchase.

The start up of Train 1 should be good news for Cheniere’s management, which has been through many twists and turns this past year, including the recent ouster of Cheniere’s founder and CEO, Charif Souki.

Chevron’s Gorgon Project - Australia: The Chevron-operated Gorgon Project is one of the world’s largest natural gas projects and the largest single resource development in Australia’s history. The Project is under construction on Barrow Island, a Class A Nature Reserve, located around 60 kilometres off the northwest coast of Western Australia. It includes a three-train, 15.6 MTPA LNG facility and a domestic gas plant to supply Western Australia.

The Gorgon project has been plagued by cost overruns, which escalated from $37 billion in 2009 to more than $54 billion by 2014. Nonetheless, Gorgon’s first LNG cargo is expected to be loaded in early 2016.

The Gorgon Project is operated by an Australian subsidiary of Chevron (47.3 percent interest), in joint venture with the Australian subsidiaries of ExxonMobil (25 percent), Shell (25 percent), Osaka Gas (1.25 percent), Tokyo Gas (1 percent) and Chubu Electric Power (0.417 percent)

Shell’s LNG Canada – B.C. Canada: Led by Shell, LNG Canada is expected to make a final investment decision (FID) in 2016. Shell, KOGAS, Mitsubishi and PetroChina are working together to design, build and operate the proposed LNG Canada project, located near Kitimat, B.C. in the traditional territory of the Haisla First Nation.

On December 2, 2015, LNG Canada marked the beginning of specific site preparation activities that will take place in advance of a FID, noting on their website that “this work will put the project in the best position possible for construction, should the project move ahead.” Prior to taking FID, however, LNG Canada still needs to ensure the project is economically viable and in a world of low-oil prices, Shell itself has acknowledged that it’s challenging to take FID on a project that will cost an estimated C$25bn-$40bn ($19bn-$31bn).

There are dozens of proposed Canadian LNG projects but so far, none have taken FID due to competition from US projects and low oil prices. LNG Canada is well positioned in terms of permitting and already has all of its provincial and federal environmental approvals and 2016 could be the year it all comes together.

Eni’s Coral FLNG and Mozambique LNG – East Africa: In recent years, massive natural gas discoveries in Mozambique have the potential to elevate the country to the world’s third-largest exporter of natural gas. According to Poten and Partners, Mozambique could become the latest country to sanction a floating liquefaction (FLNG) plant, with Eni’s Coral FLNG expected to take FID in early 2016. Coral FLNG is a partnership of Eni, PetroChina, Korea Gas Corp., Galp Energia and Mozambique national oil company ENH.

Anadarko and its partners have discovered more than 75 trillion cubic feet (Tcf) of recoverable natural gas resources and are working to develop one of the world’s largest LNG projects, Mozambique LNG. Earlier this year project partner, Mitsui, indicated that FID would be made by the end of March 2016. This could be a bit optimistic since according to reports, various government approvals are still needed and heads of agreements still need to be converted into sales and purchase agreements (SPAs’).

The Mozambique LNG partners are Empresa Nacional de Hidrocarbonetos, Anadarko, Mitsui & Co, Bharat PetroResources, ONGC Videsh, Oil India, and PTT Exploration & Production.

What are your top LNG projects to watch in 2016? Let us know your thoughts below.

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