The U.S. is continuing its breakneck dash to the top of the liquefied natural gas (LNG) exporters club, but that momentum is still being threatened by the ongoing trade war between the U.S. and China.
On Thursday, the Federal Energy Regulatory Commission (FERC) said it had approved the construction of four LNG projects and related facilities to export natural gas from the U.S.
The FERC approved NextDecade’s 3.6 billion cubic feet/day (bcfd) Rio Grande project, Cheniere Energy’s 1.5-bcfd Corpus Christi Midscale, Exelon Corp.’s 0.8-bcfd Annova LNG Brownsville, and Texas LNG’s 0.3-bcfd Brownsville.
All four LNG project sponsors have applications pending before the U.S. Department of Energy (DOE) seeking authorization to export gas to non-Free Trade Agreement (FTA) countries.
“The Commission has now completed its work on applications for 11 LNG export projects in the past nine months, helping the U.S. expand the availability of natural gas for our global allies who need access to an efficient, affordable and environmentally friendly fuel for power generation,” FERC Chairman Neil Chatterjee said in a release.
Second Phase Push
The FERC approvals also mark the continued push of the so-called second phase of the U.S. LNG juggernaut that has the potential to rival both Qatar and Australia as the world’s top LNG exporter by the mid part of the next decade. However, that possibility is in jeopardy as the trade war between the U.S. and China nears the 1-½ year mark.
For the U.S. LNG sector to reach its full potential, it needs a plethora of help from China in both the signing of long-term offtake agreements so several project proposals can reach the all important final investment decision (FID), as well as funding from Chinese financial institutions.
The longer the trade war persists the greater the chance that it will negatively impact the U.S. LNG sector for the long-term, thus causing a loss of potential global LNG market share to not only Qatar, and Australia, including market share in the Asia-Pacific region, which accounts for two-thirds of global LNG demand, with that amount forecast to increase going forward, but also to Russia as it ramps up its LNG export sector as well as a host of other smaller and ambitious LNG exporters.
Notwithstanding, one noteworthy significance from yesterday’s FERC approval is that the Texas LNG project is a so-called mid-size project at 4 million tons per annum (mtpa) of liquefaction capacity. Some in the industry maintain that mid-scale LNG projects range up to 3 mtpa, but the Texas LNG project was intentionally designed with mid-scale in mind, which has advantages over larger scale LNG projects, including quicker speed going to market, LNG offtake flexibility, efficient use of capital, and creative technical solutions. According to Texas LNG, the project will also promote a low-risk tolling model which will optimize gas price arbitrage between Texas and global markets.
As of June, Texas LNG had signed a number of non-binding agreements with Chinese, Southeast Asian and European customers for cumulative total volumes exceeding phase one volumes of 2 mtpa. These customers are a mix of state-owned and private enterprises, the company said.
Texas LNG is also in discussions with additional potential offtakers, including traders and portfolio players, according to the company. Moreover, marketing for full capacity of 4 mtpa is also is underway with negotiations of binding agreements expected to be completed prior to ground breaking in 2020.
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