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Uncertain global economics prompt Excelerate to shelve US LNG export plan

Washington — Citing recent, dramatic changes in global economic conditions, Excelerate Liquefaction Solutions has placed a liquefied natural gas export project in Texas on hold, according to a regulatory filing.

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In a filing with the US Federal Energy Regulatory Commission posted Wednesday, the company asked that its application be placed in abeyance until April 1, "at which time Excelerate will be able to provide the commission with an update on the status of the project."

Putting the regulatory proceeding on ice "would help to prevent the unnecessary expenditure of resources by both Excelerate and the commission during the first quarter of 2015," the company said in the filing.

Nearly 11 months ago, the company asked for FERC authorization to build and operate a nearly 30-mile gas pipeline and a floating LNG export facility that would ship as much as 1.38 Bcf/d from Texas' Lavaca Bay.

According to the February 6 filing, the project was intended to be a tolling facility with offtakers securing the upstream gas supply.

The plans called for two floating liquefaction, storage and offloading units near an LNG import terminal originally proposed by Calhoun LNG, which was approved but never built. The two new, floating terminals would have a combined peak LNG production capacity of 10 million mt/year, according to the application.

Under the original plan, the company wanted the terminal and pipeline to be in service by the fourth quarter of 2018. The project was to be built in two phases, with dredging to begin in the first quarter of 2015 and construction of the pipeline facilities to begin in the third quarter of 2016, according to the application.

But things have changed, the company told FERC, pointing to "uncertainty regarding the economics of the project" driven by "a steep decrease in the price of oil" and other global economic shifts.

"In light of these changes, Excelerate has conducted a strategic reconsideration of the economic value of the project and has determined to place the project proceedings at the commission on hold pending a change in circumstances, either generally or from the renewed interest of potential counterparties," it told FERC.

Federal regulatory oversight of LNG projects is conducted by FERC and the Department of Energy, with the latter considering the impacts of imports or exports on the US energy economy.

Requests to export gas to countries with free trade agreements with the US generally are rubber-stamped by DOE, but the agency is required to consider the impact on US energy resources and pricing of exports to non-FTA countries more deeply and does so after FERC has completed the bulk of its work. DOE granted the Excelerate project its FTA authority in 2012.

A FERC review is far more involved and time-consuming, focusing on engineering, design, land-use and environmental issues surrounding the massive projects.

Excelerate, which is based in The Woodlands, Texas, is majority-owned and controlled by George Kaiser, who is also the principal owner of Kaiser-Francis Oil and chairman of BOK Financial.

Excelerate also operates the Northeast Gateway Project, an LNG import facility offshore Boston, and owns and operates LNG facilities in Argentina, Brazil, Israel and the UK.

--Chris Newkumet,
--Edited by Keiron Greenhalgh,