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Kinder Morgan again delaying startup of Elba LNG export terminal

Highlights

Ongoing commissioning 'issues' cited

Freeport LNG also awaits startup

Houston β€” Kinder Morgan is further delaying the startup of its Elba Liquefaction export terminal in Georgia as it continues to experience unspecified problems during commissioning, a spokeswoman said Tuesday.

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The operator did not say how long the delay would last. Before the recent issues were first disclosed in early May, officials had said they expected to begin LNG production by the end of April and that in-service had been targeted for May 1.

Kinder Morgan's planned 2.5 million mt/year terminal near Savannah is utilizing Shell's Movable Modular Liquefaction System. These small-scale liquefaction trains are largely assembled off-site, and they allow for relatively easy disassembly and redeployment should underlying market conditions change. The 10 units being installed at Elba mark the first time this specific technology is being deployed in the US.

In an e-mail responding to questions, spokeswoman Katherine Hill said "startup of Elba has been delayed due to additional common commissioning issues that are systematically being addressed on the first of the 10 liquefaction units." She did not elaborate.

"We will issue a press release when we have resolved the issues and are in service," Hill said.

It was not clear, meanwhile, when Freeport LNG in Texas would start up. While a spokeswoman said there were "no issues" and "all is normal," production at the facility had not started as of Tuesday, and observable gas deliveries to the facility have been at zero for at least a week. The operator had previously said it expected liquefaction to begin in April or May, with the first cargo ready to load in July.

The market is watching activity at both facilities closely as, once they are in operation, the first wave of major LNG export terminals in the US to come online will be complete. There are currently four export facilities operating on the Gulf and Atlantic coasts. Another dozen or so projects that are part of the second wave are under active development or in early stages of construction.

Total US LNG feedgas deliveries have averaged 5.2 Bcf/d this month to date, down roughly 7% compared with May, as deliveries to Sempra Energy's Cameron LNG in Louisiana having tapered off as the facility looks to be wrapping up its commissioning process, S&P Global Platts Analytics data showed. Feedgas deliveries to Kinder Morgan's Elba Liquefaction have been far more subdued, averaging roughly 5 MMcf/d this month to date, well below the estimated 33 MMcf/d per train capacity.

Backed by a 20-year offtake agreement with Shell, Elba is by far the smallest of the existing crop of major US LNG export terminals. Still, Kinder Morgan's terminal will provide a stable revenue driver in a new and growing sector for the pipeline operator.

The Houston-based company's network already moves more than a third of the gas consumed in the US, and feedgas demand from LNG export terminals, including its terminal, is expected to boost volumes on that network.

OTHER EXPORTERS

Cheniere Energy shipped its first LNG cargo from its Sabine Pass export terminal in February 2016. Shipments began at Dominion Energy's Cove Point terminal in Maryland in March 2018 and at Cheniere's terminal near Corpus Christi, Texas, in December 2018.

The fourth terminal in operation, Cameron LNG shipped its first cargo last week. The tanker carrying that cargo, Marvel Crane, was near a ship-to-ship transfer point in the Bahamas on Tuesday, Platts' trade flow software cFlow showed.

In February, Excelerate Energy and Equinor completed the first-ever such transfer of LNG in the Bahamas, from a tanker to an FSRU. Such transfers are sometimes utilized to optimize delivery of LNG cargoes to market. The advantage is that a FSRU is a mobile, cheaper option for LNG offtake. That's especially beneficial in the Bahamas, where the island chain uses LNG for power production and most locations don't have a full-sized receiving terminal. The Marvel Crane, meanwhile, would be able to head for its next loading location more quickly.

US LNG export projects have consumed an aggregate of 736 Bcf of gas this year to date, roughly 51% more than last year at this same time. As export capacity continues to expand, aggregate US feedgas deliveries are expected to break over 2 Tcf by the end of the year, a 65% increase over 2018, Platts Analytics data showed.

-- Harry Weber and Ross Wyeno, newsdesk@spglobal.com

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