LNG production has ramped up amid a wave of new project final investment decisions (FID) that could launch the worldwide market into an oversupplied state well into the late 2020s.
Last year, total LNG production reached an estimated 322 million tonnes. This year, a blended average puts production growth around 30 million tonnes, Stifel analyst Benjamin Nolan said, as global production “has been ramping and will continue to ramp through yearend.”
Corpus Christi Train 2 and a full-year run rate from Train 1, along with Sabine Pass Train 5, partial year impacts from Freeport Train 1, Cameron Train 1, Elba Island, Ichthys Train 2, and Prelude account for most of the additions this year, Nolan told OGJ Oct. 22.
“This year, supply has exceeded demand,” he said. “That is not to say that utilization has fallen, but the price of the commodity (nearly half of 2018) tells you that LNG is oversupplied, and price had to fall to incentivize incremental demand (in this case price sensitive demand came primarily from Europe),” Nolan said.
Expect a similar scenario in 2020 where demand is growing, he said, but not at a pace high enough to support prices given the growth in supply, noting a slowing of start-ups in 2020 [+26 million tonnes/year] and a drop off in 2021 [+11 million tpy].
“That begins to balance in 2021 and 2022 as supply growth slows, but with the wave for new project FIDs ramping up production in 2023, 2024, and 2025 (Golden Pass, Calcasieu Pass, Mozambique, LNG Canada, Arctic LNG, and Qatar expansion) it will very likely be challenging for demand to keep up with supply until 2026 or 2027. We are expecting a demand compound annual growth rate of about 5% through 2030, with possible upside of 7%,” he said.
What follows is a snapshot of LNG production projects recently completed and in late-stage construction for start up in the coming years, as well as projects with positive FIDs reported this year.
Cameron LNG
Cameron LNG—jointly owned by affiliates of Sempra LNG, Total SA, Mitsui & Co. Ltd., and Japan LNG Investment LLC—began commercial operation of Train 1 of its liquefaction export facility in Hackberry, La., in August following completion of performance testing and receipt of US Federal Energy Regulatory Commission authorization to begin service (OGJ Online, Aug. 20, 2019).
Pipeline feed gas was introduced in April, and the facility began producing LNG and shipping commissioning cargos in May (OGJ Online, May 14, 2019).
Train 1 will have the capacity to produce 4 million tpy of LNG. The overall project includes three liquefaction trains with a projected export of 12 million tpy of LNG (1.7 bcfd).
In its public report submitted to FERC in October, Cameron LNG said construction activities on Trains 2 and 3 progressed through the month of September. These activities included civil works, structural steel installation, painting, insulation, fireproofing, piping, and electrical and instrumentation works. Precommissioning has been initiated in Phase 2 of the project.
On Oct. 18, FERC approved a variance request related to the commissioning procedures for the Train 2 MR and PR gas turbine solo runs, as well as requests to introduce hazardous fluids and commission the Train 2 ISBL Hot Oil System and the Train 2 PR Gas Turbine—advancing the unit toward commercial start up in next year’s first quarter. Train 3 is expected to begin LNG production in the second quarter of 2020.
An expansion, if undertaken, would include two additional liquefaction trains and as many as two additional full containment LNG storage tanks. The expansion is capable of increasing LNG production capacity by 9.97 million tpy of LNG (1.41 bcfd). If constructed, Cameron LNG’s export capacity will be 24.92 million tpy (3.53 bcfd).
Corpus Christi Liquefaction
In September, Cheniere Energy, Houston, reported substantial completion of Train 2 at the Corpus Christi Liquefaction (CCL) export terminal in Corpus Christi, Tex., was achieved on Aug. 28. Commissioning is complete and first commissioning cargo was reported in July (OGJ Online, July 3, 2019).
Train 1 of the CCL project was placed in service in March after substantial completion was achieved Feb. 28. Train 1 was the first liquefaction train placed into operation at a greenfield liquefaction facility in the Lower 48 states.
In a report submitted to FERC in October, Cheniere said engineering for Stage 2, which includes Train 3, is 96.5% complete, procurement is 98.2% complete, and that subcontract and direct hire construction work are 17.2% and 37.1% complete, respectively, as of the end of September. Overall project completion for Stage 2 is 68.6%.
Construction for Stage 2 continued with placement of concrete foundations, structural steel erection, aboveground piping installation, cable tray installation, cable pulling, fireproofing, electrical, mechanical and instrumentation activities in Train 3. The heavy lift equipment plan setting program continued. Completion of Train 3 is expected in the first half of 2021.
Each train in the three-train CCL project is expected to have a nominal production capacity of 4.5 million tpy of LNG, which is prior to adjusting for planned maintenance, production reliability, and potential overdesign.
On Oct. 10, Cheniere requested FERC authorization to increase the total LNG production capacity of the CCL project to 875.16 bcf/year from the currently authorized 767 bcf/year.
Sabine Pass Liquefaction
Substantial completion of Train 5 of Cheniere’s Sabine Pass Liquefaction (SPL) in Cameron Parish, La., was announced in March. Centrica PLC loaded its first liquified LNG cargo from Sabine Pass Train 5 in September. Prior, in August, FERC performed a construction inspection of the expansion project that included Trains 5 and 6 and utilities and associated support systems.
Piling work had been completed since the previous inspection, and the project is continuing with bulk construction activities. Concrete base slabs have been completed and the project has begun the installation of aboveground piping and equipment. Construction activities also include the continued installation of underground piping (amine, firewater, hot oil).
As of Sept. 30, the project is 38.1% complete. Engineering is 83.8% complete, procurement is 54.1% complete, subcontracts is 34.3% complete, and construction is 5.5% complete.
FID of Train 6 was made in June. To fund a portion of its construction, as well as a third LNG berth and required supporting infrastructure, Cheniere entered into 5-year, $1.5-billion senior secured credit facilities with 29 banks and financial institutions.
In mid-October, Cheniere requested an extension from FERC on its April 2015 authorization to construct and operate Sabine Pass Trains 5 and 6. An approval would grant Cheniere until December 2023 to place Train 6 into service.
With the announcement, Cheniere also raised its run-rate production guidance to 4.8–4.9 million tpy/train up from 4.5–4.9 million tpy/train. The increase in run-rate production is based on the impact of production optimization, maintenance optimization, and debottlenecking projects at the SPL project.
Freeport LNG
In September, Freeport LNG Development LP (FLNG), Houston, shipped the first LNG commissioning cargo for Train 1 from its liquefaction facility on Quintana Island in Freeport, Tex. (OGJ Online, Sept. 4, 2019).
Some 150,000 cu m of LNG was loaded aboard the LNG Jurojin, which departed from the Freeport LNG terminal on Sept. 3. The first cargo loading is a step towards the start of commercial operations, which the company said was expected in September, but an official statement had not been provided as of press time. Once fully operational, Train 1 will produce more than 5 million tpy of LNG.
The project includes three pretreatment trains, a liquefaction plant with three trains, a second loading berth, and a 165,000-cu m full-containment LNG storage tank. Each liquefaction train will be capable of producing a nominal 4.4 million tpy of LNG (13.2 million tpy total) for export, equal to a total liquefaction capacity of 1.8 bcfd of natural gas. The expected in-service date for Train 2 is January 2020, with Train 3 coming online in May 2020.
A late-September inspection report from FERC provided an update on construction activities for the pretreatment facility (PTF) and the liquefaction facility (LQF).
At the PTF, pile installation and foundations were completed in the trains. All structural and support steel was substantially complete for Trains 1, 2, 3, and common areas. Pipe testing was complete in all three trains and common areas. Trains 1, 2, and common area painting and insulation was complete, but Train 3 was ongoing. Train 3 energization was ongoing. Substantial amounts of scaffolding were being removed in Train 2. Train 2 commissioning activities were ongoing, and Train 1 was being prepared for in-service operations.
At the LQF, foundations and structural steel supports were complete for Trains 1-3. Pulling, testing, and terminating electrical cable was complete. Lube oil flushes were complete in Train 1, and in progress in Train 3. Fabrication, erection, and weld-out of pipes in Train 3 continued. Soft-seated valves were being tested in Trains 2 and 3. Insulation and coating activities were completed in Train 1 and were ongoing in Trains 2 and 3. Instrumentation loop checks were complete in Train 1 and common areas, while instrumentation field installations and loop checks for Trains 2 and 3 were in progress. Train 1 was being prepared for in-service operations.
Freeport LNG anticipates adding a fourth train by 2021, bringing total plant capacity to more than 20 million tpy. On Sept. 9, Freeport LNG reported that Westbourne Capital and its co-investors will provide a mezzanine loan up to $1.025 billion in support of the proposed expansion efforts. The financing, combined with a contemplated bank facility, is enough to provide 100% of the capital required for Train 4, Freeport reported.
FERC and DOE authorizations for the Train 4 project have been received and a fixed price engineering, procurement, construction, commissioning, and start up contract let to KBR Inc.
Elba Liquefaction
The first of 10 liquefaction units at the $2-billion Elba Liquefaction Facility at Elba Island near Savannah, Ga., was placed into service by Elba Liquefaction Co. LLC (ELC), a joint venture of Kinder Morgan Inc. and EIG Global Energy Partners, on Sept. 30. (OGJ Online, Oct. 4, 2019).
Previously only an LNG import terminal, the facility is now also able to produce LNG for export. Start-up activities are under way on Trains 2-3, commissioning of Trains 4-6 is ongoing, and construction on Trains 7-10 is largely complete, ELC said. Under full development, the Elba project is expected to have a total capacity of 2.5 million tpy of LNG for export.
In mid-September, FERC inspected the project. Final commissioning and start-up activities are ongoing in the utility areas. Feed gas, refrigerants, hot oil, and utilities have been introduced to the main balance of plant (BOP) piperack with isolation to Trains 2-10.
The inspection primarily focused on final verification of the gas and fire detection and protection systems for Trains 4-6. In addition, the inspection focused on final verification of construction activities, such as general housekeeping and clearing of scaffolding, in Trains 1-3 and the main pipe rack, as well verifying the construction activities of the remaining units.
In the BOP and terminal upgrade areas, including the refrigerant trucking area, all piles, foundations, and structural steel have been installed. In addition, all major equipment, piping, instrumentation, electrical cables, and associated design features have been installed. Pile installation and foundation work is complete for all 10 units. The project also has completed setting all skids that contain equipment for all 10 units and current work includes installing interconnecting piping for Trains 6-10.
The LNG impoundment basin and mixed refrigerant impoundment basin, including their insulated concrete lining and respective sump pumps, have been installed. In addition, FERC staff verified installation of the fire and gas system for the impoundments was installed and functional. The spill trenches surrounding Trains 1-5 have been installed and were graded and sloped to the respective spill trench. Final sloping of the spill containment system and graded areas around equipment is still needed surrounding Units 6-10.
Golden Pass LNG
Early this year, ExxonMobil Corp. and partner Qatar Petroleum made an FID to develop the Golden Pass LNG export project in Sabine Pass, Tex. Golden Pass awarded the engineering, procurement, and construction contracts for the project to a joint venture of Chiyoda International Corp., McDermott International Inc., and Zachry Group. Since construction began in May, 34 local subcontracts have been awarded by the joint venture. The facility is expected to be operational in 2024.
The liquefaction project will produce 16 million tpy of LNG via three 5.2-million-tpy trains. The project also will include associated utility systems, interconnections to the existing regasification terminal, and expansion of the site’s storm protection levee system. Existing infrastructure includes five 155,000-cu m LNG storage tanks, two marine berths capable of accommodating the largest LNG carriers, and the 69-mile Golden Pass pipeline system. The project might add compressor stations to the existing pipeline to facilitate receipt and redelivery of 2.6 bcfd of gas.
Other projects
In August, Venture Global LNG Inc. made an FID and closed project financing for its 10-million tpy Calcasieu Pass LNG plant and associated 1.9-bcfd TransCameron pipeline in Cameron Parish, La. Site construction has been under way since February and the project is expected to begin commercial operations in 2022. TransCameron will extend 24 miles of 42-in. OD pipe from east of a Tetco interconnect to the LNG plant.
Elsewhere, Mozambique LNG is the country’s first onshore LNG development. The Total-operated project includes the development of Golfinho and Atum fields within Offshore Area 1 and the construction of a two-train liquefaction plant with a capacity of 12.9 million tpy. Area 1 contains more than 60 tcf of gas resources, of which 18 tcf will be developed with the first two trains. Final investment decision on Mozambique LNG was made on June 18 and the project is expected to come into production by 2024.
And lastly, in late September, Total, Novatek, and the other project shareholders reported an FID for the Arctic LNG 2 development on Gydan peninsula in Russia. The project will produce 19.8 million tpy of LNG and is expected to export its first cargo by 2023. The second and third trains will start up by 2024 and 2026.
