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Delfin, Golar to develop floating LNG export project

Delfin Midstream has teamed up with the Bermuda-based shipping company Golar LNG to develop what would be the first offshore LNG export terminal in the US , which the developers say will allow the project to offer more flexible terms to buyers.

The joint development agreement is designed to facilitate the financing, marketing, construction, development and operation of Delfin LNG , according to a June 21 news release. Delfin CEO Frederick Jones said Golar's floating model increases flexibility for the project and will allow Delfin to offer "innovative commercial solutions," such as reduced credit requirements and medium-term off-take agreements of roughly 10 years.

Delfin LNG would include four floating gas liquefaction vessels capable of producing 13 million tonnes per annum (1.7 Bcf/d gas equivalent) in total.

A final investment decision for the first floating LNG vessel is expected in 2018, with additional units depending on market demand, Jones told S&P Global Market Intelligence. First LNG from the project is planned for 2021 or 2022.

Fred Hutchison, executive director of LNG Allies, a trade association of which Delfin is a founding member, said that as he understands the agreement, Delfin "could move forward in stages with the basic mooring and onshore elements plus the first [floating LNG vessel] comprising the initial stage."

Golar has worked on three floating LNG vessels with its first, the FLNG Hilli Episeyo, expected to depart the Keppel shipyard in Singapore in the third quarter.

Golar deploying smaller, low-cost technology

US liquefaction capacity and export forecast

Click on the image to view a larger size.

Platts Analytics' US gas liquefaction and LNG export forecast does not currently include the Delfin LNG Project, which among other projects has been previously excluded based on global market conditions.

According to Golar, however, the company's Mark II next-generation FLNG solution, currently under development, will be the lowest cost liquefaction technology in North America . The Mark II technology is significantly scaled down, offering liquefaction capacities of just 3 million tonnes per annum, or about 385 MMcf/d of gas equivalent. With global LNG prices around $5 to $6/MMBtu, lower-cost liquefaction could give the Delfin LNG project the necessary edge to compete effectively in the global market.

Other factors impacting Delfin's cost structure could potentially come from the offshore terminal's location which may impact port costs, licensing fees and shipping costs.

Currently Platts Analytics' LNG export forecast includes Cheniere Energy's Sabine Pass and Corpus Christi terminals, Dominion's Cove Point LNG , Cameron LNG , Freeport LNG and Kinder Morgan's Elba Island LNG project.

Delfin LNG on June 1 received U.S. Department of Energy authorization to export to countries with which the U.S. does not have a free-trade agreement. The location of the proposed facility, about 40 nautical miles off the coast of Cameron Parish, La., makes the offshore portion of the project subject to the Deepwater Port Act and the jurisdiction of the U.S. Coast Guard and the U.S. Department of Transportation's Maritime Administration, which approved the project March 13.

The project now awaits final permitting for its onshore portion from the Federal Energy Regulatory Commission, which has been without a quorum to issue major orders since early February.