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New blow for Irish LNG as plans shelved for floating terminal at Cork

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New blow for Irish LNG as plans shelved for floating terminal at Cork

Highlights

FSRU would have imported LNG from Texas project

Follows government policy switch on LNG imports

London — Plans for a floating storage and regasification unit at the Irish port of Cork will not go ahead after a preliminary deal signed in 2017 with US LNG developer NextDecade expired, officials said Jan. 14.

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The FSRU could have served as an outlet for up to 3 million mt/year of supply from NextDecade's proposed Rio Grande LNG export terminal in Texas. When the memorandum of understanding reached with the Irish port was announced, NextDecade said it was in discussions with European energy companies to enter into long-term purchase contracts for delivery of LNG at the port.

Since then, NextDecade has pushed Rio Grande LNG's schedule several times amid challenges securing long-term supply contracts, most recently in May 2020 when it said a final investment decision would occur in 2021. Then, in November 2020, France's Engie halted talks over a potential long-term supply agreement with NextDecade, amid pressure not to import LNGproduced from shale gas. NextDecade said its commercial efforts are buoyed by recent price strength in international markets, and the developer maintains its current 2021 FID target.

"Selling the gas is still the biggest variable," said Michael Webber, managing partner of investment research firm Webber Research & Advisory. "Maybe Cork could have topped off the commercialization process, but it was never going to be an anchor. They still need to build the book. Cork would have been icing on the cake."

Earlier Jan. 14, Ireland's environment minister, Eamon Ryan, said the Port of Cork had ruled out pursuing the LNG import terminal.

"Due to the increased uncertainty in Ireland's evolving policies regarding the importation of LNG, NextDecade has elected to suspend development activities related to the Inisfree FSRU project in the Port of Cork," Patrick Hughes, the company's senior vice president of strategy and business development, told S&P Global Platts said in an e-mail response to questions.

The move is the latest setback for the prospect of LNG supplies to Ireland after the new Irish government last year set out its opposition to the import of LNG based on fracked natural gas from the US. The MOU with NextDecade expired at the end of 2020.

In response to a parliamentary question on the status of the project -- one of three planned LNG import facilities in Ireland -- Ryan said: "The Port of Cork has advised that the MOU expired on Dec. 31 and that they have no intention to renew it."

NextDecade said it continued to focus its activities on the Rio Grande LNG project.

"The price strength we are seeing in the global LNG market from Asia to Europe confirms our longstanding views that the market is tightening and with only approximately 8 mtpa of additional LNG capacity to be added annually from 2021 and 2024, we expect the market to further tighten," Hughes said. "The world needs substantially more LNG and NextDecade's Rio Grande LNG project is well-positioned to help solve this growing problem."

Policy shift

Ireland has no LNG import facilities and is reliant on its major producing field Corrib and UK gas imports to meet its demand requirements of around 5 Bcm/year.

The previous Irish government saw LNG as a way to ensure security of gas supply given dwindling offshore production. However, the new coalition Irish government -- which includes Ryan's Green Party -- said when it came to power last year that it would not support LNG terminals that imported fracked gas from the US. And in December, Ireland's cross-party committee on climate action called for a ban on the development of LNG import infrastructure as part of recommendations for strengthening the country's draft climate bill.

The Joint Committee on Climate Action on Dec. 18 published its evaluation of the draft bill, making a total of 78 recommendations on how to improve the legislation. Among them was a call for LNG import infrastructure to be banned due to environmental concerns, specifically around the import of gas sourced from US shale.

Shannon LNG

In addition to the Cork FSRU project, there are currently two other proposed LNG import projects in Ireland.

The planned 5 Bcm/year Shannon LNG terminal also suffered a major setback in November when the High Court in Ireland ruled to quash all development consents for the project.

The final project under development is UK-listed Predator Oil & Gas' plans for an FSRU, which the company has said would "not use shale gas as an LNG feedstock."