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Annova LNG discontinuing US export project: operator

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Annova LNG discontinuing US export project: operator

Highlights

Developer had trouble securing commercial contracts

CEO recently left to take TC Energy job

Houston — Annova LNG has scrapped development of a proposed 6.5 million mt/year export facility along the underutilized Brownsville Ship Channel in South Texas, Annova said March 22, citing "changes in the global LNG market."

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"The entire Annova team is very grateful to the greater Brownsville community for having supported this project for several years," the operator said in a statement. "We are in the process of notifying our supporters, commercial partners and regulatory agencies of this decision."

The decision to immediately discontinue the liquefaction project came after power generator Exelon tried, and failed, to find a "suitable offer" to sell its majority stake in the project, Exelon spokesman Mark Rodgers later told S&P Global Platts. Abandoning the LNG project, while not its first choice, "better financially positions Exelon's generation business going forward," he said.

Beyond Exelon, equity partners in Annova LNG included midstream operator Enbridge, engineering firm Black & Veatch and construction contractor Kiewit.

While global price swings, shipping constraints and supply outages at existing terminals during a volatile 2020 have prompted a higher level of commercial engagement for some US developers so far this year, others, especially greenfield projects that are to be built from the ground up, have continued to struggle to secure sufficient long-term contracts to sanction the multi-billion dollar facilities.

Annova had yet to announce any firm long-term contracts tied to supply from its terminal during more than six years of development, and it had not yet reached a final investment decision. Project CEO Omar Khayum recently left to take a vice president job at Canada's TC Energy.

Two other Brownsville liquefaction projects, NextDecade's up to 27 million mt/year Rio Grande LNG and Glenfarne Group's Texas LNG, which is expected to include 2 million mt/year of capacity in its first phase, have not yet been sanctioned. Only NextDecade has announced any firm long-term contracts, a single deal for 2 million mt/year with Shell.

Despite the decision by Annova LNG, Texas LNG remains on track for a final investment decision later this year or early in 2022, Chief Operating Officer Langtry Meyer said in an e-mail responding to questions.

NextDecade said March 18 that it was continuing work to as finalize commercial agreements needed to be able to sanction at least two trains at Rio Grande LNG later this year.

COMPETITOR CHALLENGES

As for other greenfield developers, Pembina's proposed Jordan Cove LNG facility in Oregon has not announced any firm offtake agreements tied to its supply. On Feb. 25, Pembina said it could no longer predict when it would able to build the terminal. It said it was evaluating a path forward.

Tellurian hasn't provided an update in months on a target for a final investment decision on its proposed Driftwood LNG project in Louisiana. It said March 15 that it was working to clear debt off its balance sheet.

In a December 2017 interview with Platts, then-CEO Meg Gentle said that if the developer got into 2019 and didn't have commercial momentum toward FID, it might consider other options, including a potential sale of the project. Some two years later, Tellurian's only firm commitment in Driftwood is a $500 million investment from France's Total. Absent an FID by June, Total can walk away from the commitment.

Gentle left Tellurian in November 2020.