Surging American LNG exports will soon make the US the third largest global exporter, while Canada is eying the lucrative Asian import market
By 2025, the US will have more LNG export capacity than either Australia or Qatar, the current top exporters of LNG. That remarkable achievement – less than 10 years after the first LNG export cargo left Cheniere’s Sabine Pass facility – is being propelled by the development of a second wave of US LNG export facilities.
During the first five months of 2019, US exports of LNG have been growing steadily, reaching a new peak of 4.7 Bn ft3 per day (Bcf/d) in May 2019, according to the US Department of Energy’s Office of Fossil Energy. US LNG exports have averaged 4.2 Bcf/d in the first five months of the year, pushing the US past Malaysia as the world’s third-largest LNG exporter — a position it is expected to retain until the end of 2020.
Underpinned by national decarbonisation polices, Europe’s appetite for LNG continues to increase, creating an attractive market for US LNG. Europe accounted for almost 40% of US LNG exports in the first five months of 2019.
The only dark cloud hovering above the US LNG export market is the ongoing trade war between the US and China. China’s 10% tariff on US LNG imports imposed in September 2018 has made US cargoes less competitive on the spot market. Every month since the imposition of the tariffs, US LNG has accounted for only 1% of China’s LNG imports. By contrast, US LNG accounted for 7% of China’s imports during the first six months of 2018.
The second wave
While the door to the Chinese market might currently be closed, there are still an ample number of buyers lining up for US LNG, topped by Europe, South Korea, Japan, India, Mexico, South America and the Caribbean.
Four new trains, with a combined capacity of 2.4 Bcf/d — Sabine Pass Train 5, Corpus Christi Trains 1 and 2, and Cameron Train 1 — have been commissioned on the US Gulf Coast with one or several of those markets in mind.
The US Energy Information Administration (US EIA) expects US LNG exports will continue to increase in 2019 as the first trains at the two new export facilities in Freeport LNG in Freeport, Texas and Elba Island LNG in Savannah, Georgia are commissioned in the next few months.
US EIA expects US LNG exports to average 4.8 Bcf/d in 2019 and 6.9 Bcf/d in 2020. By 2021, six US liquefaction projects are expected to be fully operational and another two new LNG export projects, Golden Pass in Texas and Calcasieu Pass in Louisiana, that started construction this year are expected to be commissioned by 2025.
In July, US Gulf Coast LNG export facility Freeport LNG, Quintana Island in Freeport, Texas, marked a milestone as it reached the final stage of commissioning its first liquefaction train with a capacity of 5 mta. The milestone was reported by McDermott International along with its EPC partners, Japan’s Chiyoda International Corporation and US-based Zachry Group.
"First of its kind in the US, with the largest electric motor-driven refrigeration compressors, the Freeport LNG facility will significantly improve the energy export capabilities we have in the US", says McDermott senior vice president for North, Central and South America Mark Coscio.
Like the other 5 mta capacity trains under development at Freeport LNG, Train 1 uses an electric motor with a variable frequency drive for the cooling and liquefaction compression power, reducing emissions and improving efficiency. Freeport LNG is expected to start up Train 2 in January 2020 and Train 3 in May 2020. Freeport LNG is also developing another liquefaction plant, Train 4, which would add another 5 mta nameplate capacity.
In Canada, much of the attention has been focused on LNG Canada, the US$40Bn export facility that Shell and its partners issued FID in October 2018. The Kitimat, British Columbia facility will initially have two trains with the nameplate capacity to produce 14 mta of LNG, with the possibility of expanding to four trains producing 28 mta.
Shell, which has a 40% stake in LNG Canada, expects the first LNG cargo to be commissioned in the mid-2020s, when it anticipates a shortage in global supply. Shell points out that LNG Canada has access to low-cost natural gas from British Columbia’s shale gas resources and fewer tonne-miles to transport LNG to north Asia buyers — about 50% shorter than LNG carriers moving cargoes from the US Gulf of Mexico and can avoid traveling through the Panama Canal. Petronas with 25% interest, PetroChina (15%), Mitsubishi Corp (15%) and Kogas (5%), hold the remaining interest in LNG Canada.
An LNG export facility on a much smaller scale is being developed about 1,500 km south of LNG Canada in Squamish, about 70 km north of Vancouver. Woodfibre LNG president David Keane tells LNG World Shipping that a FID on the project is expected later this year, with construction to follow soon after.
Being developed by Woodfibre LNG Ltd, a subsidiary of Pacific Oil & Gas, the small-scale LNG processing and export facility would have two trains with a nameplate capacity of 2.1 mta. It will have floating storage capacity of 250,000 m3.
In June, Woodfibre LNG Export signed a binding LNG Sales and Purchase Agreement (SPA) with BP Gas Marketing Limited for the delivery of 0.75 mta of LNG over 15 years on a free on board (FOB) basis, with first delivery expected in 2023. Pacific Oil & Gas is also in discussions with BP Canada Energy Group to provide gas transportation and balancing services, ensuring a reliable delivery of gas to the Woodfibre LNG export facility over a 15-year term.
Even more modest in scope than Woodfibre LNG, FortisBC Energy Inc will start exporting LNG produced by its small-scale LNG terminal in British Columbia in standard-sized shipping containers to China in 2021. The two-year agreement with privately held, Hong Kong-registered Top Speed Energy Oversea Corp Limited, will see 53,000 tonnes of LNG a year, or about 60 ISO containers, shipped weekly from Tilbury LNG, Delta, British Columbia starting in Q3 2021 to China.
“This is the first agreement of its kind that will see Canadian LNG shipped regularly to China”, says FortisBC vice-president of market development and external relations Douglas Stout.
Shipments of LNG were first sent by ISO container from the Port of Vancouver to China in 2017 to test the viability of the service. “With the new service”, he says, “breakbulk facilities in China will be able to move the containers by trucks for distribution in the country, providing them with flexibility to meet the needs of industrial and public utility customers [that are not connected to natural gas pipeline distribution].”
The deadline for a FID on Goldboro LNG, Canada’s first East Coast LNG export facility, has been extended to 30 September 2020, following a long-term deal with German utility Uniper for gas deliveries. Goldsboro LNG developer Pieridae Energy Limited announced it had negotiated extensions of the key deadlines under its 20-year agreement with Uniper. Deadlines for expected commercial deliveries of gas to Uniper will start between 30 November 2024 and 31 May 2025. The 20-year agreement with Uniper is for half the liquefied natural gas produced at Goldboro LNG, or 5 mta.
While the project still faces hurdles, Pieridae Energy spokesperson James Millar told LNG World Shipping that Goldsboro LNG was “ahead of the game” of some other facilities because it had all of its major permits in place, a major anchor customer and does not require the construction of a greenfield pipeline.
To be located in Nova Scotia at the Goldboro Industrial Park in Guysborough, the Goldsboro LNG facility lies between the Maritimes and Northeast Pipeline and the Sable Offshore Energy project. Plans call for the facility to have two trains that produce a nameplate capacity of 10 mta of LNG, with three storage tanks of 230,000 m3 each and a marine jetty that can accommodate LNG carriers between 140,000 m3 and 250,000 m3 capacity. The projected capital expenditure for the project is US$10Bn, with an expected start of commercial operations by 2023.
Argentina exports first LNG
In July, Argentina state oil company YPF SA signed a contract with US-based Excelerate Energy for the charter of the LNG carrier Excalibur to transport LNG from the country’s new floating LNG (FLNG) terminal at the port of Bahia Bahia. LNGC Excalibur, with a capacity of 138,000 m3, will load its first cargo from the Tango FLNG in September and be on charter to YPF until May 2020.
The charter is the latest development in Argentina’s new-found status as a seasonal exporter of LNG. Early in July YPF contracted McDermott International, Inc to provide pre-front-end engineering design (Pre-FEED) services for a 5 mta LNG onshore liquefaction facility, with a potential expansion to 10 mta, at the Vaca Muerta Shale field in Argentina.
Argentina’s domestic natural gas production has been rising steadily in the past three years, largely because of increasing production from the Neuquén Basin’s Vaca Muerta shale and tight gas play, according to the US EIA. Production from Vaca Muerta surpassed 1.0Bn ft3 per day (Bcf/d) in December 2018. As production has grown, Argentina has resumed exporting natural gas by pipeline to neighbouring Chile and Brazil and has started exporting LNG.
Argentina joined Peru as the only South American countries exporting LNG, when the first LNG export cargo was shipped from the newly commissioned Tango FLNG facility on 6 June. Tango FLNG has a capacity of 0.5 mta of LNG and is expected to produce about eight cargoes of LNG for export annually.
During its warmer months (October to April), Argentina is able to export its surplus domestic natural gas production via pipeline to Brazil, Chile and Uruguay, while in its colder months it must meet domestic natural gas demands through imports from Chile and Bolivia and LNG from other countries.
In 2018, Argentina imported 2.59M tonnes of LNG, down 22.5% from 2017, with Qatar, US, Nigeria and Equatorial New Guinea as its leading suppliers. As investments in domestic natural gas production, pipeline and storage increases, LNG exports are expected to cease altogether.
YPF’s contract with McDermott underpins the development of the vast Vaca Muerta shale field and Argentina’s ambitions to become a major LNG exporter. Vaca Muerta, as large as Eagle Ford in Texas, accounts for about 23% of Argentina’s total annual gas production. It has technically recoverable resources of 308M ft3 of natural gas and 16M bbl of oil and condensate. Only about 4% of the field’s acreage has begun to be developed.
To benefit from its vast shale gas resources, Argentina needs to invest billions of dollars into building pipelines, storage terminals and possibly additional FLNG units. In 2010, Peru LNG became the first South American LNG export facility. Last year, Peru exported 3.6M tonnes of LNG to buyers in Japan, South Korea, Spain, Netherlands and Malta. The result of a US$3.8Bn investment, Peru LNG was developed by US-based Hunt Oil, South Korea’s SK Innovation, Japan’s Marubeni and oil major Shell.