Commonwealth LNG faces regulatory, commercial questions ahead of construction

Commonwealth LNG must address unresolved questions from US regulators as it works to secure a permit certificate to build its proposed 8.4 million mt/year export facility in Louisiana.

Commercial questions also remain, with construction currently targeted to begin in the first quarter of 2022. The results of a tender for terminal supplies that Commonwealth issued in January and said would be awarded by June has not been announced.

The latest regulatory snag involves the National Marine Fisheries Service. In public comments filed with the Federal Energy Regulatory Commission on June 25, the agency said an assessment that addresses potential project impacts to essential fish habitat is incomplete. NMFS also said that the project's main permitting review has been paused for more than a year due to the delay in the availability of a draft Environmental Impact Statement, for which federal agencies' authorizations are dependent.

"A complete Essential Fish Habitat assessment should include all activities associated with this project and a description of measures taken to avoid, minimize, mitigate, or offset the adverse impacts of the proposed activities on EFH," the agency said.

Besides the status of the tender, Commonwealth has also not said publicly whether a preliminary agreement the developer signed in 2019 that called for commodity trader Gunvor to take up to 3 million mt/year of supplies from the terminal was finalized. Separately, Tellurian announced in late May that Gunvor had agreed to buy 3 million mt/year of supply from its proposed Driftwood LNG facility in Louisiana, as part of a 10-year sales and purchase agreement.

A spokesman for the Commonwealth did not respond to several requests for comment June 28 on the regulatory and commercial questions.

In a letter to federal officials in May and several submissions since then addressing various information requests, Commonwealth acknowledged the project's potential impact to fish habitat, and it was working to address any concerns.

"The impacts on protected species resulting from the loss of fish larvae or benthic organisms would be indirect, in the form of a reduction of food resources for species such as the loggerhead sea turtle," the developer said in one of the filings. "However, these would not represent significant impacts given the small area of construction relative to the abundance of similar habitat and food resources in the general vicinity of the project."

After a two-year lull in firm commercial deals for most US developers of new liquefaction terminals, activity has started to pick up in recent months, as evidenced by Tellurian's deal with Gunvor and a similar deal it signed with commodity trader Vitol in early June.

Forward prices

For existing exporters, global gas and LNG forward prices are trending strong and relatively stable, pointing to a long runway for exporters to enjoy healthy netbacks on deliveries to Europe and Asia, buffeted by cheap feedgas costs due to low US Henry Hub prices. Feedgas deliveries to US LNG export terminals have recently been averaging over 11 Bcf/d, implying utilization of over 90%.

Those trends are positive signals for developers such as Commonwealth that are hoping to begin exports in the mid-2020s.

The terminal, as proposed, would include six liquefaction trains, each with average operating liquefaction capacity of 1.4 million mt/year.