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New blow for US LNG in Europe as Irish court quashes Shannon LNG consents

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New blow for US LNG in Europe as Irish court quashes Shannon LNG consents

Highlights

High Court ruling ends legal fight over 5 Bcm/year project

Irish government now opposed to 'fracked' gas imports

France's Engie backed out of US LNG deal after climate pressure

London — In a new blow for US LNG in Europe, the High Court in Ireland has ruled to quash all development consents for the planned 5 Bcm/year Shannon LNG project.

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The court on Nov. 9 issued an order to environmentalist group Friends of the Irish Environment (FIE) that quashed an extension awarded by planning authority An Bord Pleanala in 2018 of a 10-year planning approval first given in 2008.

According to FIE, the court order means Shannon LNG and its US backer New Fortress Energy would now have to apply for new planning approval for the project.

FIE argued that the extension of the period of a planning permission where development had not commenced triggered the need for a new environmental assessment.

New Fortress -- which took over the project in 2018 -- could not be reached for comment on the court ruling.

The setback for Shannon LNG follows a decision by France's Engie earlier this month to halt talks over a potential long-term supply agreement with US LNG developer NextDecade, with the French company having come under pressure not to import LNG produced from shale gas.

It points to the environmental credentials of US LNG seemingly coming under increasing scrutiny in Europe as the EU pledges to be net zero carbon emissions by 2050.

Opponents to Engie securing a long-term deal for US LNG with NextDecade said importing LNG produced from fracked shale gas ran counter to France's climate change goals.

Government opposition

Ireland had previously been a supporter of the Shannon LNG project, saying in 2018 that it welcomed the entry of New Fortress into the stalled project and that it would improve Ireland's gas supply security by providing import route diversity.

But Ireland's new coalition government -- formed in June between the country's two main political parties Fine Gael and Fianna Fail together with the Green Party -- has reversed the policy and come out against "fracked" gas imports.

"We do not support the importation of fracked gas and shall develop a policy statement to establish that approach," it said in its Programme for Government in June.

"As Ireland moves towards carbon neutrality, we do not believe that it makes sense to develop LNG gas import terminals importing fracked gas, [and] accordingly we shall withdraw the Shannon LNG terminal from the EU Projects of Common Interest (PCI) list in 2021," it said.

Shannon LNG is currently listed as a PCI, which allows the project developer to apply for funding from the Connecting Europe Facility, which runs until the end of 2020.

New Fortress agreed to buy the rights to the project in 2018 from its previous owners, Ireland-based investors Paddy Power and John Power, who in turn had bought it from US producer Hess in 2015.

There had been no progress on the project since the sale by Hess despite the project being on the drawing board for more than a decade.

It had been thought that with the UK vote in June 2016 to leave the EU, Ireland would work quickly to revive Shannon LNG to lessen Ireland's dependence on gas imports from now non-EU member state, the UK.

Other projects

While Shannon LNG seems to be dead in the water for now, two other Irish LNG import projects remain at the planning stage.

One is the 4 Bcm/year Inisfree floating LNG import facility in the south of the country, proposed by NextDecade, which would bring LNG from the company's Rio Grande LNG export facility in the US.

A third Irish LNG import terminal has also been proposed by UK-listed Predator Oil & Gas, which has specifically said it would not be used to import LNG produced from US shale gas.

Predator has said its planned FSRU in southern Ireland would target LNG imports using gas feedstock from a "transparent origin that is not dependent on fracking operations related to shale gas exploitation."

In September, Predator said it had completed its timeline for commissioning the FSRU, with first gas deliveries from the project expected in the first half of 2024.

It has said in the past the FSRU would have a technical capacity of around 40% of the planned InfraStrata FSRU project in northwest England, implyling a technical capacity of the Irish FSRU of 2 million-2.4 million mt/year (2.8-3.3 Bcm/year).

Ireland's gas demand is currently around 5-6 Bcm/year, meaning the import terminal could meet around half of Irish annual consumption.

As well as imports from the UK, Ireland meets its gas demand from the offshore Corrib field.

The field started up in 2015 and has produced at rates as high as 350 MMcf/d -- or 10 million cu m/d -- but output is now estimated to be around half that.

According to industry estimates, Corrib may only produce for 15 years -- meaning it could reach the end of its operational life as early as 2030.