Cheniere Energy Inc.'s commitment to expand its Corpus Christi LNG terminal may be the first of several announcements in 2018 that see U.S. LNG developers committing to a so-called second wave of natural gas export projects.
Cheniere said May 22 that it had reached a final investment decision on a third 4.5 million-tonne-per-annum liquefaction train at its Corpus Christi LNG export facility, marking the first FID for new U.S. LNG export capacity since 2015. The announcement came as no surprise to analysts and industry watchers, who have heard the company's executives say the final go-ahead was coming after Cheniere signed contracts with trading company Trafigura Pte. Ltd. and a subsidiary of the state-run China National Petroleum Corp.
The Corpus Christi LNG export terminal under construction in Texas will now be built to include three liquefaction trains. Source: Cheniere Energy Inc. |
"This was a sentimental hurdle to clear since Corpus train 3 was far and away the most likely train to advance in 2018," said Katie Bays, an energy analyst at Height Capital Markets. "We expect more FIDs this year, and while this one was no surprise, Cheniere is not the only company to have signed contracts with offtakers."
Venture Global LNG is one of those companies. The export hopeful now has 60% of the proposed capacity at its Calcasieu Pass LNG export project under long-term contract after announcing a 20-year sales and purchase agreement with BP PLC for 2 million tonnes of LNG a year. With only 4 mtpa of capacity left to sell, Bays said Venture Global's Calcasieu Pass has emerged as a contender for a 2018 investment decision.
Expansions at Sempra Energy's Cameron LNG project under construction in Louisiana or at the Freeport terminal being built in Texas could also attract new contracts and investment decisions. Cheniere has another expansion project proposed for its Sabine Pass terminal already operating in Louisiana, which Guggenheim Securities analyst Matthew Phillips said will become a growing focus as the fifth and last train under construction at the facility nears commercial service.
Beyond the sixth train at Sabine Pass, four U.S. LNG export terminals have all major federal approvals in hand but have not received a final investment decision: the Golden Pass and Lake Charles ventures, backed by majors, and the Magnolia and Delfin LNG projects, which are spearheaded by smaller companies. A dozen other U.S. ventures are still moving through the federal permitting process, including Venture Global's Calcasieu Pass and Plaquemines LNG projects. In Canada, Royal Dutch Shell PLC has said it hopes to move forward with its massive LNG Canada venture in 2018.
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Developers have struggled to find buyers willing to commit to long-term contracts that allow multibillion-dollar projects to line up financing. "The contract is a stand-in for cash flow," Bays said. "There has to be cash flow certainty to move forward with financing."
New long-term agreements were hard to come by when talk of a supply glut dominated the conversation surrounding the global LNG market. That could be changing — analysts and developers alike have begun sounding the alarm over an emerging shortage they see developing in the early to mid-2020s if additional export capacity is not sanctioned.
"Long-term markets like Asia know they need long-term commitments to get new capacity built," RBN Energy Managing Director Rick Smead said. "Eventually, the bubble dissipates. So they're starting to make the commitments."


