By Javier E. David
Natgas exports are where it’s at as US energy matures
U.S. natural gas production reached the eye-popping total of 25 trillion cubic feet in 2012, and recent estimates by the Energy Information Administration show that the U.S. surpassed both Russia and Saudi Arabia this year in producing the resource. But creating an export-driven natural gas renaissance in the United States requires infrastructure—and a lot of it. Research firm IHS forecasts the liquefied natural gas (LNG) boom leading to about $346 billion in energy-related infrastructure investments by 2025. “The advantage is the U.S. has a lot of infrastructure and a unique arbitrage opportunity in overseas markets thanks to the shale boom,” notes Alex Choinski, partner and project finance lawyer at the law firm of McDermott Will & Emery. “The economics can work if you can get the timing and deal structure right.”
The rapidly expanding landscape for natural gas holds serious challenges—and plenty of opportunity—for U.S. energy markets. Read on for 10 big natgas export projects to watch.
Chesapeake Bay, Md.-The most recent natgas export facility to score the Department of Energy’s approval, Dominion Resource‘s Cove Point will be built at an estimated cost of nearly $4 billion. The company will still need the sign-off of the Federal Energy Regulatory Commission (FERC) in order to break ground at the southern Maryland location. Once Cove Point is up and running, the portal will be authorized to ship up to 770 million cubic feet of natgas a day, for 20 years. According to American Petroleum Institute data, it will support nearly 3,400 jobs in the immediate area.
Cameron Parish/Sabine Pass, La.- Sabine Pass’ long odyssey toward DOE approval finally reached fruition in September 2012, two years after Cheniere Energy first petitioned federal regulators for an export license. The facility will be one of several clustered on the energy-rich Gulf Coast, and will export 2.2 billion cubic feet per day of natural gas—the daily value of which will top $26 million, according to API data. The project is expected to create 3,000 jobs, but will require an estimated $5.6 billion in both equity and debt.
Lake Charles, La.- A joint partnership between Energy Transfer Partners and BG Group will bring the Lake Charles terminal into existence in an area that already has an LNG storage facility. The terminal will be able to ship up to 15 million metric tons per year. The companies will break ground in 2015, and the first LNG exports are expected to ship in 2019, according to Energy Transfer. The company, which calls Lake Charles “one of the most advanced LNG development projects” it owns, expects to file for its environmental review with FERC by the end of 2014.
Freeport, Texas- Freeport-McMoRan Energy got DOE approval in May for this Gulf of Mexico facility, seeking a 30-year license from which 1.4 billion cubic feet per day is expected to be shipped. The company says construction of the port will include a mix of new facilities, offshore structures, salt-dome caverns and pipelines.
Elba Island near Savannah, Ga.- An small islet just off the coast of Georgia, Elba Island will have 11.5 billion cubic feet of LNG storage capacity, and is expected to ship 500 million cubic feet per day. The terminal will need an estimated $1.4 billion to $2 billion in investment, and is expected to create about 800 construction jobs. According to Southern LNG, the Elba Island terminal “is directly connected to four major pipelines and indirectly connected to two others,” making it a ready LNG hub to markets in the Southeast and mid-Atlantic states.
Warrenton, Ore.- Oregon LNG is looking to create what it calls the “largest privately funded development in Oregon’s history.” Yet the Warrenton-based facility was dealt a big blow last month after the Clatsop County Commission voted unanimously to reject Oregon LNG’s application. Although the company says FERC will have the final say, prospects for the $6.3 billion facility remain cloudy. McDermott, Will & Emery’s Choinski said that “some [terminals] may not be built because of significant financing and regulatory issues, and the LNG pricing dynamics could change.” He suggested a weeding-out process would take place, with each facility subjected to market forces.
Coos Bay, Ore.- Jordan Cove’s proposed LNG terminal will be situated on the port of Coos Bay, an industrial development zone, which makes its prospects better than the Warrenton facility. The $4.49 billion Coos Bay facility would export up to 1.2 billion cubic feet per day of natgas, and is projected to reap anywhere between $3.5 billion and $4.6 billion in proceeds. According to Platts, Jordan Cove is the first West Coast-based company to apply for an LNG export license, and will be the first to build an export terminal from scratch.
Corpus Christi, Texas-The 612-acre terminal, located in southern Texas, has spent 14 months on the DOE’s waiting list. If granted approval, Cheniere’s terminal will export nearly 800 billion cubic feet of natural gas, that by Cheniere’s estimates could create upward of 8,000 jobs in the region—and as many as 49,000 nationwide. According to Cheniere, exports from the Corpus Christi campus could begin as early as 2018.
Gulf of Mexico, off the La. Coast- This facility, commonly referred to as the Main Pass Energy Hub, will be used to ship up to 24 million tons of LNG per year to countries with U.S. free trade agreements. According to IHS data, that volume of natural gas can support the creation of more than 100,000 jobs across the country, and could reap anywhere between $3.6 billion and $5.2 billion in annual revenue. The facility is a joint partnership between United LNG and Freeport-McMoRan Energy.
Pascagoula, Miss.-This plant first began life as a $1 billion import facility—plans that fell apart after the U.S. shale boom led domestic natural gas prices to collapse. Now, the Pascagoula terminal is part of Kinder Morgan‘s efforts to get a DOE export license, which will ship 1.5 billion cubic feet of natgas to countries without a free trade agreement. The terminal’s projected costs will run somewhere north of $6 billion.