Lake Charles LNG wins export licence and awards FEED

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The US Department of Energy (DoE) last month authorised a third proposed natural gas liquefaction project – Lake Charles in Louisiana – to export LNG to countries with which the US does not have a Free-Trade Agreement (FTA). The project’s owner, Trunkline LNG Export, lost no time in awarding a contract for the front-end engineering and design (FEED) to French engineering contractor Technip.

This third non-FTA approval takes the total liquefaction export capacity authorised by the DoE to date to 5.6 Bcf/d, equivalent to around 42 mtpa – meaning that if all three projects go ahead the US will have one of the world’s largest LNG production capacities by the end of the decade. To put this volume in context, the Energy Information Administration (EIA) expects US gas production this year to reach a record 70.0 Bcf/d; 5.6 Bcf/d is 8% of that.

A case-by-case process: Commenting on the numerous LNG export applications that are still queued up for non-FTA approvals, the DoE said it would “continue to process the applications currently pending on a case-by-case basis, in the order of precedence previously detailed” in December 2012. It added: “As further information becomes available at the end of 2013, including the EIA’s Annual Energy Outlook Report, the department will assess the impact of any market developments on subsequent public interest determinations.”

That suggests that we could see another couple of determinations – assuming a period of a couple of months between each – before the DoE has the new information to hand. The next two projects in the queue are Dominion Cove Point, which is planning 5.25 mtpa of capacity, and a proposed third liquefaction train at Freeport, which would have liquefaction capacity of 4.4 mtpa.

In fact, the Dominion Cove Point application is for a volume of 1.0 Bcf/d, while Freeport’s second is for 1.4 Bcf/d. Were both applications to be approved, the total volume of gas authorised for export to non-FTA nations would rise to 8.0 Bcf/d, or more than 11% of projected US gas production in 2013.

Three trains for Lake Charles: Subject to environmental review by the Federal Energy Regulatory Commission (FERC) and final regulatory approval, the proposed expansion of the Lake Charles project is conditionally authorised to export up to 2.0 Bcf/d, equivalent to 15 mtpa, for a period of 20 years. Technip announced in the last week of August that the expansion project would mean building three identical liquefaction trains, along with associated utilities and offsite facilities.

The FEED contract will be executed by Technip’s operating centre in Houston, Texas, with support from the group’s centre in Paris, France. It is scheduled for completion during the first half of next year.

The liquefaction process selected for the FEED study is Air Products’ C3MR. Assuming the project is granted the other approvals it requires, and that the owners reach a positive final investment decision (FID), the design and construction of the new facilities will be managed by BG LNG Services, LLC, a wholly owned subsidiary of BG Group.

A first for Technip: “This award constitutes the first LNG liquefaction FEED project for Technip in the US,” said David Dickson, Technip’s senior vice-president for North America. “It is also a true testimony of BG Group and its partners’ trust in our expertise as, after working for them in the subsea and offshore businesses, we are now expanding our collaboration to onshore.”

Up to now, all the liquefaction projects that BG has been involved in have opted for ConocoPhillips’s Optimised Cascade process, with Bechtel as the EPC contractor.

The DoE granted the first authorisation to export LNG to non-FTA countries, at a rate of up to 2.2 Bcf/d, in May 2011 to Cheniere’s Sabine Pass project in Cameron Parish, Louisiana. A second authorisation was granted in May of this year for exports from the Freeport LNG Terminal in Quintana Island, Texas, at a rate of up to 1.4 Bcf/d.

All three projects are conversions of existing regasification facilities, meaning that much of the required infrastructure, including storage tanks and berths for LNG carriers, is already in place.

The DoE said it had conducted “an extensive, careful review of the application to export LNG from the Lake Charles LNG Terminal”.  Among other factors, the department considered the economic, energy security, and environmental impacts – as well as public comments for and against the application and nearly 200,000 public comments related to the associated analysis of the cumulative impacts of increased LNG exports.

An uncomfortable wait: What remains unclear is just how much production capacity the DoE will feel able to accept before it decides that the cumulative impact is reaching a level inconsistent with the public interest. The projects still in the export approvals queue are in for an uncomfortable wait – especially those that have started spending serious amounts of cash on the FERC approvals they require for siting, construction and operation.

Article by Alex Forbes

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