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Kinder Morgan pushes startup of Georgia LNG export terminal back to April

Highlights

Construction delays cited for revised timing

Company suggests project completion may be in 2020

Houston — Kinder Morgan said Wednesday it was pushing back startup of its Elba LNG export terminal in Georgia to April because of construction delays, and in an updated timeline suggested completion of all 10 liquefaction trains may not occur until early 2020.

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The Georgia terminal is among three US liquefaction facilities that are expected to begin service this year, aiding the country's efforts to be a major supplier of LNG to global destinations.

The startup of Elba, Freeport LNG and Sempra Energy's Cameron LNG would double the number of major US LNG export terminals in operation. All three have faced construction or weather-related delays. In Kinder Morgan's case, the operator had most recently said it expected in-service of the first train by the end of March, with the remaining trains online by the end of 2019. Startup had previously been expected by the end of 2018.

"Kinder Morgan has revised its initial in-service date expectations for the Elba Liquefaction Project as a result of delays during construction," spokeswoman Lexey Long said in an e-mail responding to questions. "The first unit of the project is now expected to be in commercial service in late April."

She said the first export cargo will likely go out when sufficient LNG is accumulated in storage tanks after the first unit is in service, though the exact timing would be up to Shell, which is supporting the facility with a 20-year contract to buy LNG produced there.

The in-service date of the remaining nine units is expected to follow sequentially, with one each month after the other, Long said. Based on that timing, if the first train came online in late April, it could be January 2020 before all the trains are online. The in-service date of the final unit will depend on the duration of the commissioning activities for the successive units, Long said.

LNG netbacks to Transco Zone 4, the most liquid market for Elba Island LNG feedgas supplies, have been trending downward since earlier in the year, as global demand has failed to keep pace with supply growth from the US, Russia and Australia.

The netback to the UK's National Balancing Point is currently pricing at a roughly 70 cents/MMBtu premium to the Platts JKM spot price - the benchmark price for spot LNG in Northeast Asia -- and was estimated at just over $1/MMBtu on Wednesday, S&P Global Platts Analytics data show. This premium suggests that initial exports from the Elba Island facility may target European markets, which have taken roughly 40% of total US LNG production so far this month.

MODULAR TECHNOLOGY

While the Elba Island facility near Savannah remains the smallest of the US LNG export projects, its completion will be a major milestone for Shell, marking the first application of its Movable Modular Liquefaction System design for LNG exports. Shell eventually plans to have these small-scale MMLS units deployed across North America, liquefying stranded or otherwise flared gas for use as vehicle and marine fuel.

The units at the Elba facility will be commissioned on site and will not require a commissioning cargo before commercial service begins, Kinder Morgan's Long said. Investment funds managed by EIG Global Energy Partners own a 49% stake in the joint venture that holds the terminal. Kinder Morgan expects that 70% of the revenue associated with the project will be recognized when the first liquefaction unit is in service.

Meanwhile, Sempra has said most recently that it expects the first train at its Cameron LNG export terminal in Louisiana to begin production in the second quarter. Freeport LNG CEO Michael Smith told Platts last week he expects the Texas facility to be ready to ship its first export cargo in July.

-- Harry Weber and Ross Wyeno, newsdesk@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com