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US LNG maintains edge amid 'headwinds'; Cove Point case to air environmental critique of FERC

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021

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Essential Energy Insights - January 2021


US LNG maintains edge amid 'headwinds'; Cove Point case to air environmental critique of FERC

The U.S. is expected to retain its near-term competitiveadvantage in LNG exports despite remaining vulnerable to the global environment.

"LNG producers with price exposure are likely tocontinue to face headwinds for profitability and potentially for the ratings inthe coming years," Standard and Poor's Ratings Services said in an April12 note. "Nonetheless, depending on the time horizons for companies,banks, and investors, some new projects, particularly those with tollingarrangements in the U.S., will likely continue [to] make it off the drawingboard."

The U.S. will also lead the world as the "predominantsource of new liquefaction capacity over the next five years" with 62million tonnes per annum already under construction, according to theInternational Gas Union's 2016 World LNG Report. Final investment decisions in2016, however, will be in short supply.

With the U.S. entry to world LNG as the backdrop, a federal courtwill hear oral arguments in a case that could have wide implications forfederal approval of energy export projects.

While industry proponents anticipate a favorable decision,the environmental groups petitioning to review FERC's approval of 'sDominion Cove Point LNG LPexport terminal in Maryland are confident.

"I do think that our oral arguments regarding CovePoint are even stronger than the ones we presented regarding some of the GulfCoast facilities, because for Cove Point we have additional information fromthe contracts for the gas suppliers who are going to be feeding into theterminal," Sierra Club lawyer Nathan Matthews said in an interview. Oralarguments in the U.S. Court of Appeals for the District of Columbia Circuit arescheduled for April 19.

The backers behind a proposed Oregon LNG export project andthe pipeline to supply it have filed with FERC a request for rehearing of thecommission's order that denied their application to build and operate thefacilities.

Veresen Inc. announcedApril 11 that Jordan CoveEnergy Project LP and Pacific Connector Gas Pipeline LP submitted the requestfor rehearing of FERC's March 11 order, saying they have entered into several agreementsthat demonstrate commercial support for the development.

The Governor of Colorado has thrown his weight behind anOregon LNG export terminal, asking FERC to reconsider its earlier rejection ofthe project and related pipeline.

"The Jordan Cove and Pacific Connector Pipeline Projectrepresents an important new source of demand for natural gas producers inColorado," Gov. John Hickenlooper wrote in an April 11 letter to thecommission. "It is important for shippers and domestic natural gasproducers to continue to access markets for natural gas including the AsianPacific countries which comprise the fastest growing liquefied natural gas marketin the world."

SCT&E LNGannounced April 5 it signed a nonbinding memorandum of understanding to sell 2million tons of LNG per year from its proposed export in Cameron Parish, La., to "areputable Asian energy company that owns and operates an LNG import terminaland has plans to construct additional terminals."

"Signing this MOU provides the capacity commitmentrequired to further advance the engineering and overall project developmentactivities," SCT&E LNG Vice President of Energy and Technology ScottRay said in a statement. "We are currently finishing up a several-monthengineering study and have phased our execution plan to match capacitycommitments."

The potential multibillion dollar agreement is the fourthnonbinding MOU the Southern California Telephone & Energy subsidiary hassigned for its planned terminal, which would have a liquefaction capacity ofabout 12 million tons per annum, or mtpa.