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Smarter vs. bigger LNG projects; Freeport LNG hits the road for project bond

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Smarter vs. bigger LNG projects; Freeport LNG hits the road for project bond

LNG project developers must learn to think small, expert says

LNG exportprojects need to be smarter instead of bigger, according to an energy infrastructureexpert at the 2016 EIA Energy Conference.

The currentmarket for LNG exports has challenges that have shifted the look of the sector,such as an oversupply of natural gas and increased competition. These challengeswill require LNG export proposals to decrease in size and become more innovative,said Ernie Megginson, president of the energy projects consulting firm Megginson& Associates Inc.

The glutof natural gas in the world will make it difficult for big projects that boast largerliquefaction trains to find the large, long-term customers that supported earlierU.S. LNG export projects. The large amount of gas has shifted the market to theadvantage of buyers. Analysts have estimated the LNG sector will be oversupplieduntil the early 2020s.

Freeport LNG shopping long-term project bond for train 2

FreeportLNG is marketing a long-term project bond to raise capital for the second trainof its LNG liquefaction and export terminal on Quintana Island near Freeport, Texas.

The deal,originally slated forthe first quarter, is now on track for a mid-July launch, according to multiplesources. It would be part of Freeport's program to refinance up to $8 billion inmini-perm debt. The proposed issuance was addressed by Terry Pratt, global infrastructureratings director at S&P Global Ratings, in a panel presentation July 7. A spokespersonfor Freeport said a roadshow is underway to shop the issuance, and the intendedlaunch timing was confirmed with other sources close to the deal.

The projectcompany's proposed senior secured notes would be due in 2038. Freeport delayed itsissuance on the heels of depressed commodity prices, energy market volatility anddampened investor sentiment as crude prices dipped below $30 a barrel in January.

Shell-led group again defers Canadian LNG project amid global price slump

A consortiumled by Royal Dutch Shell plcwill not give the green light to a Canadian LNG project by a pushed-back year-enddeadline, citing capital constraints and slumping prices for the fuel.

, carrying cost estimatesof C$23 billion to C$36 billion, had been expected to announce a final investmentdecision by the end of 2016. The company in February said it would not meet a previousmidyear deadline for thedecision, known as FID. LNG Canada CEO Andy Calitz said in a July 11 statement thatthe project remains a "promising opportunity" and the partners are lookingat a range of options to make it a reality.

"Inthe context of global industry challenges, including capital constraints, the LNGCanada joint venture participants have determined they need more time prior to takinga final investment decision," the company said in the statement. "At thistime, we cannot confirm when this decision will be made."

Sabine Pass LNG pulled gas throughout June with train 1 rolling, train2 testing

Naturalgas flows into Cheniere Energy Inc.'sSabine Pass LNG export terminal stayed healthy through much of June as the facility'sfirst gas liquefaction train went through its first full month of operation andthe second train was tested.

SNL Energypipeline flow data showed that deliveries to the Louisiana terminal from and Natural Gas Pipeline Co. of AmericaLLC pipelines amounted to a grand total of approximately 16.7 millionDth during June. The daily deliveries from both pipelines stayed largely in a rangeof about 550,000 Dth/d to 650,000 Dth/d. Notable breakouts from that range occurredJune 21, when deliveries hit 693,500 Dth/d, and a few days later, with a fall to213,550 Dth/d as Creole Trail deliveries dropped to nothing June 27. The month closedwith a combined daily delivery of 657,500 Dth/d. The numbers were mostly higherthan those in May.

In June,the two pipelines used about a third of their combined gas transportation capacityat the Sabine Pass delivery points, 33.1% on average. Creole Trail used about 23.9%of its capacity on average, and NGPL used about 51.0% of its capacity. The maximumcapacity to Sabine Pass was 1,725,000 Dth/d for Creole Trail delivery points and593,000 Dth/d for NGPL.

FERC targets September for review of Kinder Morgan project to feed CameronLNG

FERCstaff expects a late September release for its environmental review of 's naturalgas project to deliver 295,000 Dth/d to Cameron LNG.

In aJuly 7 notice, the commission said the staff plans to issue the environmental assessmentSept. 29. Cooperating federal agencies would then have until Dec. 28 to completetheir own work on the project review.

The SouthwestLouisiana Supply project would cost approximately $170 million.

FERC approves Freeport LNG liquefaction capacity increase

FERCapproved Freeport LNG DevelopmentLP's request to increase its LNG production capacity to 2.14 Bcf/d atits Texas export terminal.

A July7 FERC order granted the request, which was submitted by Freeport LNG, FLNG LiquefactionLLC, FLNG Liquefaction 2 LLC and FLNG Liquefaction 3 LLC. The , which will increase the authorizedpeak day LNG production level from 1.8 Bcf/d to 2.14 Bcf/d, will not involve anynew facilities or construction activities. It is based on a revised assessment ofthe capabilities of the Freeport LNG export facilities.

"Inthe instant application, the applicants explain that in preparing the estimatesin the application for the liquefaction project, they used very conservative designand operating assumptions, and that the application, therefore, reflected a veryconservative estimate of the nominal production capacity of the liquefaction trains,"FERC said in the approval order.

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