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Start of feedgas flow to Cameron LNG Train 2 bolsters US ramp-up at export facilities

Highlights

Demand lift eyed as peak winter heating season nears

Market contango supports higher terminal utilization

Houston — Cameron LNG was flowing feedgas to its second liquefaction train Monday as deliveries to US export terminals remained near a record level with the market in contango and with the peak winter season approaching.

Five of the six major facilities operating on the Gulf and Atlantic coasts were expected to see high utilization as global demand for the power plant and home heating fuel picks up in the weeks ahead. The sixth facility, Kinder Morgan's Elba Liquefaction in Georgia, has yet to ship its first cargo, and neither the operator nor the sole offtaker, Shell, has said when it would.

While netbacks have experienced some weakness, the forward curve suggests higher prices in the future. That trend continues to support the ramp-up, evidenced by gas deliveries to terminals that reached almost 8 Bcf/d last week, S&P Global Platts Analytics data show.

At Cameron LNG, in Hackberry, Louisiana, production from Train 1 began May 14 and the first commissioning cargo shipped a little over two weeks later. On Monday, feedgas was flowing to Train 2 in preparation for the start of production from the unit, contractors McDermott and Chiyoda said in a statement. A third train at the site south of Lake Charles remains under construction.

The $10 billion project is a joint venture of affiliates of San Diego-based Sempra Energy, France's Total, Japan's Mitsui and a company owned by Japan's Mitsubishi and NYK.

Total US feedgas reached a new all-time high of 7.96 Bcf/d on November 28, beating the previous record of 7.69 Bcf/d set on November 2, Platts Analytics data show. On Monday, gas deliveries to US liquefaction facilities stood at approximately 7.8 Bcf/d.

The bulk of the feedgas was being consumed by Cheniere Energy's two terminals - at Sabine Pass in Louisiana and near Corpus Christi, Texas. Also driving the uptick is Freeport LNG's Train 1 entering commercial service and bouncing back from maintenance, and a third train at Elba coming online.

After experiencing several pre-startup delays, Cameron LNG has been actively shipping cargoes from Train 1. A compressor failure in August cut utilization of Train 1 to 65-70%. Utilization returned to near normal levels last month after repairs were completed. One of the facility's offtakers, Singapore's Pavilion Energy, was heard to have canceled its spot vessel requirement for a mid-November Cameron LNG load, with poor economics possibly at play.

Beyond Cameron, majority owner Sempra has proposed to build LNG export facilities in Port Arthur, Texas, and at the Energia Costa Azul receiving terminal in Baja California, Mexico.

Sempra reached a preliminary deal with Saudi Aramco in May that calls for the state-run oil company to take a 25% stake in the Port Arthur project. Sempra previously reached preliminary agreements with offtakers that, if finalized, would cover all of the liquefaction capacity for the first phase of the export project at Energia Coast Azul. The heads of agreement were with affiliates of Total and Mitsui and Tokyo Gas . Both sets of deals need to be finalized.

As recently as September, Sempra said it expected to make a final investment decision on the Mexico project first, probably by the end of the year, followed by an FID on the Texas project around the middle of next year.

-- Harry Weber and Emmanuel Corral, newsdesk@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com

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