Freeport LNG delays target for sanctioning fourth liquefaction train until at least 2021

Houston — Freeport LNG has delayed its target for making a final investment decision on whether to build a fourth liquefaction at its Texas export facility until at least next year, amid market and coronavirus pandemic-related challenges that have hurt development efforts, the operator said June 23.

With the ability to secure new long-term supply contracts with buyers to finance projects all but shut off, multiple other developers of new US terminals and liquefaction units have put off sanctioning decisions until 2021 or beyond. Some have stopped updating timing guidance. One integrated major, Shell, pulled out of a proposed export project in Louisiana.

"As with most LNG projects around the world, COVID-19 and other market challenges have negatively impacted our development efforts," Freeport LNG spokeswoman Heather Browne said in an email. "As such, we do not expect to reach FID on Train 4 this year. Given we are a brownfield expansion, if market conditions improve, we can easily be in a position to start construction by mid-2021."

Previously, as the deadly respiratory illness spread globally, Freeport LNG had said only that it was unsure when it could advance the Train 4 expansion.

In an interview with S&P Global Platts in February, CEO Michael Smith said Freeport LNG did not have any firm long-term contracts in place tied to Train 4. A preliminary agreement signed in 2018 by Japan's Sumitomo for the purchase of 2.2 million mt/year of LNG from Train 4 expired without without being finalized, he said.

At the time, Smith lamented that the substantially lower fees that developers of new US LNG export projects were being asked to accept for their supplies compared with what was agreed to for existing facilities was making it very difficult for most developers to build.

And that was before the virus caused global LNG demand to decline sharply, pushing international prices to record lows.

Approximately 130 cargoes scheduled to be loaded between April and August at US LNG export terminals have been canceled by customers, according to Platts' latest tally based on information from market sources.

In turn, utilization at the six major US liquefaction terminals currently online has plunged, including at Freeport LNG, where three trains are in operation.