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Kinder Morgan's Tennessee Gas proposes infrastructure to serve Plaquemines LNG

Highlights

Up to 1.1 Bcf/d of supplies would flow via new interconnects

Venture Global LNG building one terminal with two more in queue

Houston — Kinder Morgan's Tennessee Gas Pipeline asked the Federal Energy Regulatory Commission Friday for permission to build new pipeline and compression infrastructure that will allow it to provide Venture Global's proposed Plaquemines LNG export project in Louisiana with up to approximately 1.1 Bcf/d of feedgas supplies.

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The application for a permit certificate for Tennessee Gas' Evangeline Pass Expansion Project comes as the 20 million mt/year LNG project has yet to show substantial commercial momentum. A challenging industry environment has been exacerbated by the plunge in recent months in global gas prices. The race to the bottom should continue due to weak Asian demand, warm weather and the impact to trade flows because of the coronavirus, while supply continues to creep upwards, increasing the risk of LNG shut-ins or economic underutilization, maintenance or slowdowns, according to an S&P Global Platts Analytics outlook.

Amid the market turmoil, Venture Global has pushed ahead with construction of its 10 million mt/year Calcasieu Pass export terminal in southwest Louisiana. Almost all of the capacity for that project has been contracted under long-term agreements with offtakers. Right behind Calcasieu Pass in the queue is the proposed Plaquemines LNG and a third proposal, Delta LNG, an up to 24 million mt/year facility. The two proposed facilities would be built south of New Orleans.

In its application filed with FERC, Tennessee Gas requested final authorization by February 1, 2021. That would allow the operator to complete and place the infrastructure project's facilities in-service no later than December 1, 2022, as requested by the shipper.

The $261.7 million Evangeline Pass Expansion Project would include 9.1 miles of 36-inch-diameter looping pipeline, along Tennessee Gas' existing Yscloskey lateral in St. Bernard Parish, 4 miles of 36-inch-diameter looping pipeline along its 500-2 Pipeline in Plaquemines Parish, and a new compressor station in St. Bernard Parish. The majority of the proposed compressor station would be built on an existing, previously abandoned site owned by Tennessee Gas, the application said.

The project would allow additional gas supplies on the Tennessee Gas system to flow from a new interconnect with Southern Natural Gas in Clarke County, Mississippi to a new interconnect with the proposed Gator Express Pipeline in Plaquemines Parish, which would supply feedgas to the LNG terminal. The operator has a 20-year agreement to supply Venture Global with up to 2 Bcf/d of firm transportation service.

Some 900 MMcf/d of gas would be delivered utilizing existing and unsubscribed available capacity on the Tennessee Gas system. The remaining 1.1 Bcf/d of gas would be provided utilizing the Evangeline Pass Expansion Project facilities, including capacity the operator is proposing to lease form Southern Natural Gas, which is also a subsidiary of Kinder Morgan.

BANK FINANCING

In the application, Tennessee Gas said Venture Global provided the required financial support for the pipeline and compressor project. The public version of the application does not make clear what would happen in the event Plaquemines LNG were not built or were delayed.

In August 2019, Venture Global completed agreements with lenders that provide sufficient financing to allow it to fully fund the balance of construction of Calcasieu Pass, the affiliated TransCameron feedgas pipeline and related commissioning activities.

The developer said at the time that a total of 13 banks and financial institutions would provide $5.8 billion in construction financing for Calcasieu Pass, while Stonepeak Infrastructure Partners has agreed to a $1.3 billion equity investment in the project. Since it has not provided an updated cost estimate for the project since 2015 nor has it disclosed publicly whether its contractor agreement with Kiewit protects it against cost overruns, it is unclear how much of the financing may be left over for Venture Global's other LNG projects.