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US LNG projects make progress, but will need to keep up as demand shifts

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US LNG projects make progress, but will need to keep up as demand shifts

Three U.S. LNG projects at different stages of development reached milestones this week amid a global oversupply that is causing shifts in market demand for the commodity.

The Sempra Energy-led Cameron LNG export terminal started commercial operations under tolling agreements, the company announced Aug. 19. The development, which was expected, marked a key milestone for Sempra as it pursues a goal of becoming one of the top LNG exporters in North America.

"This is an exciting moment for Cameron LNG and for Sempra Energy," Carlos Ruiz Sacristan, chairman and CEO of Sempra North American Infrastructure, said in a statement. "Cameron LNG is exporting liquefied natural gas to customers in the largest world markets, helping to support economic growth in the U.S. and abroad."

Another major project, Freeport LNG Development LP, began production at its Texas facility, becoming the sixth major U.S. natural gas liquefaction facility to start up. "This is an exciting and significant milestone which now paves the way for our first train 1 cargo loading expected later this month," Browne said. "Freeport's train 1 remains on schedule for a September start of commercial operations."

The Freeport LNG facility, located south of Houston on the Gulf of Mexico, experienced several construction- and weather-related delays, most notably following heavy rain in the aftermath of Hurricane Harvey in August 2017. The primary long-term buyers of offtake from train 1 are Japanese utilities Osaka Gas Co. Ltd. and Chubu Electric Power Co. Inc., which each control 2.2 million tonnes per annum of capacity.

In total, long-term contracts cover roughly 13.2 mtpa of the three-train facility's eventual output of 15 mtpa, with additional short-term contracts, including a three-year deal with commodity trader Trafigura, covering the remaining supply.

In other LNG project news, Venture Global LNG announced it had made a formal final investment decision to build its Calcasieu Pass LNG export project in Louisiana. The decision was expected after the privately held company announced in July that it secured financing commitments, nearly doubling the $5.8 billion needed to cover the development of the export terminal and the associated TransCameron pipeline.

Venture Global announced the final investment decision in an update to an Aug. 19 news release that said the company had closed the project financing, supporting the full construction and commissioning of the planned facility to reach a targeted commercial startup in 2022.

The commercial sanctioning of a new greenfield LNG terminal on the U.S. Gulf Coast represented a significant development for the burgeoning U.S. LNG industry. Venture Global had sought to stand out in a competitive field of U.S. LNG export developers by offering a low-cost model. It has said it could build Calcasieu Pass with midscale modular liquefaction trains at about half the cost of similar-sized plants.

Meanwhile, surging demand in Latin America swept the region into the top spot as a destination for U.S. LNG exports during the second quarter, according to numbers released by the U.S. Department of Energy. The region is a critical outlet for U.S. LNG. Global oversupply has depressed spot prices and discouraged exports to the world's biggest demand markets in Asia.

The DOE export data showed that overall U.S. LNG exports in the first half of 2019 went to a diverse group of countries. Regional shipments to Europe, Latin America and Asia were roughly split. Despite the rise of shipments to Latin America in the second quarter, European Union countries and Turkey remained the top regional destination for U.S. LNG over the first six months of 2019.