Freeport LNG to begin construction this year

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Freeport LNG– one of numerous projects proposed for LNG exports from the United States – expects to reach a final investment decision (FID) in the fourth quarter of this year, according to CEO Michael Smith. That would make it one of very few likely to pass this important milestone in 2014; another likely contender is Cameron LNG.

Meanwhile, the US Department of Energy (DoE) announced on Monday that it had given conditional approval to yet another project to export LNG world-wide – the Jordan Cove project in the state of Oregon on the west coast.

In a presentation at the BP stand at the Gastech exhibition on Tuesday, Smith confirmed that the US Federal Energy Regulatory Commission (FERC) has called for the final Environmental Impact Study (EIS) to be issued by the 16th June this year. That, said Smith, should mean that the project gets full FERC approval by September or October, clearing the way for FID in the fourth quarter.

BP has signed a liquefaction tolling agreement (LTA) covering the full 4.4 mtpa output from the project’s second train, joining Chubu Electric and Osaka Gas as tollers from the first two trains.

BP’s Head of LNG Origination for Asia Pacific, Alastair Smith, confirmed to Gastech News that Freeport would issue Notice to Proceed with construction to the engineering contractors, soon after the FID has been taken: “The engineering, procurement and construction (EPC) contract was signed last December with CB&I and Zachry Industrial. The first train would then come on stream in either the second or third quarter of 2018.

“Our offtake rights start when train two becomes operational, six to nine months later. The LNG will go into the BP portfolio and we’ll do a mixture of keeping it in our portfolio and also using it to support sales to customers, generally on a Henry Hub-indexed basis.”

Commenting on the political impact of the Russia-Ukraine crisis on LNG export approvals, BP’s Smith said it had tightened the focus on the need to expedite the approvals process, but added “a bigger driver is the appetite of Asian and other customers is for Henry Hub-indexed LNG; it requires long-term offtake security for projects like Freeport to go ahead”.

Not only does the project have offtake agreements for its output, financing arrangements are in place and just waiting for a positive FID before being finalised. So all the required elements seem to be lined up for construction to begin before the year-end. The first two trains will constitute the first phase, with a third train being added later.

The DoE approval for Jordan Cove, allowing exports to countries with which the US does not have a Free Trade Agreement (non-FTA), takes the total volume of gas approved for export to non-FTA countries to 9.45 Bcf/d, equivalent to 71 mtpa of LNG. The next project in line for a non-FTA licence determination is Oregon LNG, also on the west coast, followed by Cheniere Energy for Corpus Christi and Excelerate for the Lavaca Bay floating LNG (FLNG) project.

By Alex Forbes