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Magnolia LNG seeks 5 more years to build export terminal, citing market turmoil

Highlights

'Unforeseeable developments' have affected contracting

New developer wants until April 15, 2026, to complete project

New York — The developer of the proposed Magnolia LNG export terminal in Louisiana asked the Federal Energy Regulatory Commission for another five years to build the project, telling the agency that global market conditions got in the way of efforts to sign the long-term supply contracts needed to secure financing.

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FERC approved the original permit for Magnolia LNG in April 2016 and set a deadline of April 15, 2021, to complete the project. But the original project sponsor, Australia's LNG Ltd., struggled to reach any firm deals with buyers for the LNG it planned to produce. As the coronavirus pandemic crisis set in earlier this year, LNG Ltd. found itself on the verge of insolvency. Ultimately, the private US investment firm Glenfarne Group agreed to acquire Magnolia LNG in late May for $2 million.

The new developer now wants until April 15, 2026, to complete the project and associated facilities that would supply the terminal.

"Unforeseeable developments in the global LNG market have affected Magnolia LNG's ability to enter into long-term LNG offtake contracts with international customers, which are critical to securing project financing and achieving FID," Magnolia LNG said in the Sept. 11 request, referring to a final investment decision. "A short-term over-supply across the global LNG market, coupled with disruptions in the China-United States LNG trade and the ongoing COVID-19 pandemic, have delayed these offtake contracts and further delayed FID for the project."

A Kinder Morgan affiliate signed on to the request. That unit, Kinder Morgan Louisiana Pipeline, would build the Lake Charles expansion project, which involves compressor facilities to help deliver 1.4 Bcf/d to Magnolia LNG. Construction of this pipeline expansion, which FERC approved at the same time as Magnolia LNG, is dependent on the LNG terminal getting commercially sanctioned, the companies told FERC.

FERC in June approved a capacity uplift for Magnolia LNG of 0.8 million mt/year, bringing the total permitted capacity to 8.8 million mt/year. The original developer had sought the uplift, saying it realized the terminal would be able to produce more as it refined its plans and made final decisions about the equipment the plant would use.

More than a dozen LNG projects being developed in the US have yet to get commercially sanctioned. Many developers have postponed final investment decisions until 2021 or later.

Glenfarne is also the majority owner of the proposed 4 million mt/year Texas LNG project in Brownsville, Texas, through subsidiary Alder Midstream. In a June interview, Glenfarne's founder and managing partner, Brendan Duval, said the second half of 2021 would be a reasonable estimate for when the projects could reach final investment decisions.