Hackberry, Louisiana — Sempra Energy began production Tuesday at Cameron LNG, one of three North American liquefaction projects that the domestic electricity and natural gas provider is counting on to make it a major global supplier.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
The highly anticipated startup of the first train at the Hackberry, Louisiana, facility, celebrated with a visit by President Donald Trump, marks the fourth such US project to begin operations since 2016, as the US looks to give shale gas producers more outlets from key basins along the Gulf Coast, in the Midcontinent region and in the Northeast.
Sempra has proposed adding liquefaction facilities at Port Arthur, Texas, and Baja California, Mexico, as part of an ultimate goal of supplying up to 45 million mt/year of LNG to Latin America, Asia, Europe and the Middle East.
The $10 billion Cameron LNG project -- a joint venture of affiliates of majority owner San Diego-based Sempra, France's Total, Japan's Mitsui and a company jointly owned by Japan's Mitsubishi and NYK -- faced delays in late 2017 and early 2018. As many as 11,000 workers were on site last summer as contractors McDermott International and Chiyoda pushed to get the project back on track. McDermott recently said that startup of trains 2 and 3 will be delayed until 2020.
Project officials said during a tour of the facility in February that the number of commissioning cargoes that are shipped before commercial service begins could range from one to six or seven, depending on customer needs. In a statement Tuesday, Sempra said cargoes would begin being loaded in the "coming weeks."
Current netbacks to the US make Asia a destination of choice for the commissioning cargoes, though unlikely China because of Beijing's decision Monday to raise tariffs on imports of US LNG to 25% from 10% in retaliation for Washington's decision to hike duties on imports of Chinese goods.
At the facility south of Lake Charles, under a tent with the liquefaction equipment as a backdrop, hundreds of workers wearing safety vests and hard hats gathered to hear from Trump and Sempra CEO Jeffrey Martin. Both ignored in their public remarks the tariffs concerns and the impact on the US LNG industry, with Martin instead praising what he described as the administration's "forward-thinking energy policies."
Trump, who has pushed for quicker permitting by federal agencies, spoke of US energy dominance, in between talking about baseball, politics, windmills killing birds, interest rates and the people who voted for him in Louisiana. He was given a brief tour before his remarks. He described the equipment behind him as "pieces of art."
"We are independent," Trump said. "We don't need anybody."
America's promise as a leading global LNG supplier depends on the utilization of the four facilities now in operation and the two more that are preparing to start up, as well as the success of a dozen other second wave projects that are actively being developed for service in the early- to mid-2020s. It was just a decade ago that many of these facilities, including Cameron LNG, were being developed as import terminals, only to change course when the shale revolution unlocked vast reserves of cheap domestic gas.
The tariffs have forced spot cargoes from existing US exporters that may have gone to China to be diverted to other countries, and have made it more challenging for developers of new US liquefaction projects, such as Tellurian, NextDecade, LNG Limited and even Sempra for its proposed Texas facility, to be able to secure long-term contracts with buyers. China is expected to become the world's biggest importer of LNG within a decade.
"We welcome other investors yet we are very confident that we will reach FID within the next few months with or without Chinese participants," Tellurian co-founder Charif Souki said in an e-mail to S&P Global Platts on Tuesday.
Cheniere Energy, which is looking to expand, made a similar declaration last week.
Before boarding Air Force One for the flight to Louisiana, Trump told reporters at the White House that he was open to additional US tariff increases, a move that could force the Chinese to retaliate further.
Cameron LNG operates a tolling model under which the buyer of the LNG is responsible for securing its own feedgas and deciding where the cargoes are delivered. Besides the capacity that will be lifted by the portfolio players and end-users that make up the terminal's ownership group, long-term offtake agreements have been secured by Japan's Tokyo Gas and Toho Gas.
Terminal officials previously said storage tanks at the site already had a sizable amount of LNG in them that was left over from when the facility was an active receiving terminal. That meant the tanks were cooled down, making it unnecessary for Cameron LNG to bring in an import cargo for that purpose, as Cheniere did when it started up Sabine Pass and Dominion Energy did when it started up Cove Point.
Sempra is targeting a late 2019 final investment decision on the Mexican project and a late 2019 or early 2020 FID for Port Arthur LNG.
Besides Cameron LNG, Sabine Pass and Cove Point, Cheniere operates an LNG export terminal near Corpus Christi, Texas. Kinder Morgan is preparing to start up its Elba Liquefaction facility in Georgia, while Freeport LNG in Texas is expected to begin LNG production within the next few weeks.
--Harry Weber, Harry.Weber@spglobal.com
--Edited by Richard Rubin, firstname.lastname@example.org