Houston — Freeport LNG should be ready to ship its first export cargo in July, nearly two years after flooding following Hurricane Harvey helped lead to the Texas facility's most recent startup delay, CEO Michael Smith said Monday.
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Smith said in an interview with S&P Global Platts on the sidelines of the CERAWeek by IHS Markit conference in Houston that Freeport LNG is expected to begin flowing feedgas to the facility in April or May, with first LNG ready to load in July. The Atlantic hurricane season runs from June 1 to November 30.
Approximately five to 10 commissioning cargoes will be shipped before Freeport LNG begins commercial deliveries this September, Smith said. The commercial timing, announced last year, amounted to a nine-month delay from a previous target. That delay was attributed in part to flooding at an equipment yard for the Texas site following Hurricane Harvey in August 2017, and to contractor execution delays.
"We're cautiously optimistic that they're going to meet the current schedule, based on the progress they've made to date," Smith said. "There's still a lot to do. And, I would not ever say there isn't a risk that it be delayed."
With the number of operating domestic liquefaction terminals set to double this year, the US is expected to become a much bigger player in the global supply market for the chilled fuel, which is increasingly used to diversify the energy mix in Europe, Asia and Latin America.
That anticipation has put added pressure on projects currently under construction to begin exports as soon as possible, especially with a second wave of developers angling for market share and eager to break ground on their own facilities. While two other terminals preparing for startup have had their share of delays, Freeport LNG has been particularly challenged, with weather and contractor issues among the factors.
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"I don't know how more urgent you can be," Smith said. "We started the export planning and design process in 2010. I don't know how many people can do business for nine years and not have one piece of its product ever be manufactured to not be pretty anxious to see the fruits of your labor."
The International Energy Agency said in an outlook Monday that a second round of the US shale revolution is coming, with the US projected to account for some 75% of expanded global LNG trade over the next five years. The result, the agency said, will be a shake-up in international trade flows. Trade tensions between the US and China are currently impacting developers' decision-making process.
"Hopefully they'll have an announcement in the not-too-distant future that both China and the United States will be proud to have behind us," US Energy Secretary Rick Perry said during a briefing at the conference.
China imposed a 10% tariff on imports of US LNG starting in September 2018, retaliating against US tariffs on Chinese goods. Spot cargoes have continued to flow to China, though in lesser quantity from the US year on year. The bigger impact has been on efforts by US developers of new terminals to secure sufficient long-term offtake contracts and equity partners to finance construction.
Elsewhere, Cheniere Energy, which owns two of the three major US LNG export terminals currently in operation, is said to be in talks with China's state-run Sinopec about a long-term supply agreement, with the parties awaiting further instructions from government authorities about a trade resolution. The trade negotiations could come to a head within the next few weeks, just as US developers are scheduled to pitch their services at a global LNG conference in Shanghai in early April.
Tellurian's Driftwood LNG export project in Louisiana is an example. CEO Meg Gentle told Platts in an interview at the conference that there has not been a lot of commercial activity on a long-term basis recently with Chinese counterparties, though Tellurian continues to court buyers from that country.
"We're in a position now where we and the Chinese buyers are sort of standing ready to transact on things when the two governments have concluded some of their trade negotiations," Gentle said.
In the meantime, much of the market's attention is on this year's startup plans at Freeport LNG, Sempra Energy's Cameron LNG in Louisiana and Kinder Morgan's Elba liquefaction facility in Georgia. In November, Japan's Toshiba said it was backing out of its offtake plans at Freeport LNG, agreeing to pay about $800 million to China's ENN to take over its US LNG business that includes long-term obligations to buy liquefied gas from the export terminal in Texas.
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