New LNG plants could surpass nameplate capacities, adding to supply in coming years

LNG facilities currently under construction are able to achieve output above their nameplate capacity specification. Should this additional capacity materialize on a reliable, long-term basis, it could relieve some anticipated tightness in the LNG market.

These details can be confirmed in documents and permits from the Federal Energy Regulatory Commission. S&P Global Platts Analytics has also done research on additional debottlenecking that Cheniere has considered at Sabine Pass, its liquefaction facility located in Louisiana.

While debottlenecking is one way to achieve additional production gains, there is also potential for additional incremental volumes that are not quantified until a year or two of operations is achieved at the facility and efficiency gains are realized at individual trains.

If these additional volumes are ultimately achieved, they could be marketed in new contracts as facilities come online, in the US and globally.

The case for this comes from performance and capacity guarantees by engineering procurement and construction companies – known as EPCs. These include turbine manufacturers and other liquefaction technology licensing companies. The guarantees specify a minimum stated performance, and ultimately higher liquefaction capacities to meet the obligations of these contracts.

Similar to minimum – and maximum – quantities that are specified in a sales and purchase agreement between LNG producers and LNG buyers, contracts between an LNG developer and these EPC parties ensure that the liquefaction equipment is designed to meet the specifications required, sometimes well above what has been marketed.

Freeport’s potential

An example of this could be at a Texas LNG export facility with itsfirst train slated to come online this year. Freeport LNG could have excess production capacity over and above what is currently committed to firm contracts.

Freeport’s CEO, Michael Smith, mentioned in a recent interview at CERAWeek that the potential capacity at each respective train is expected to be over 5 million mt/year – the nameplate capacity stated by the company. Realization of any additional liquefaction capacity, which Smith said the company expects to know sometime in 2020, would allow Freeport to market these volumes once they are confirmed to be available long term.

The waiting period in demonstrating individual train performance will allow ample time for Freeport’s first three trains to come online, after running through both winter and summer seasons, providing an approximate excess liquefaction capacity of 1–2 million mt/year, suggested by Smith. These smaller-scale volumes could be sold into the market before 2023 and 2024.

This potential additional capacity is particularly significant given that 2023-2024 is expected to be a critical period in the global LNG market, when there could be a supply crunch as LNG demand continues to grow globally. Freeport’s case is just an example of a larger scenario that creates potential for higher LNG capacities than expected, at new brownfield and greenfield facilities coming online globally in the coming years.

Setting aside other economic factors dictating LNG fundamentals, extra capacity above the expected nameplate capacity could add up to meaningful additional volumes to the current outlook for first-phase US, and global, LNG production facilities.