Delayed Freeport Startup Makes 2019 a Bigger Year for U.S. LNG

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Researched by Industrial Info Resources (Sugar Land, Texas)--Freeport LNG LP (Houston, Texas) said last week that it would delay the startup of its liquefied natural gas (LNG) production facility in Quintana, Texas, according to news media sources. Train 1 of the facility was originally planned to come online later this year, but startup has now been pushed out to September 2019. Trains 2 and 3, which were planned to come online in 2019, are now expected to be online January 1, 2020, and May 1, 2020. With the pushing out of Train 1, 2019 is shaping up to be a big year for additional U.S. LNG production capacity.

Construction on Train 1 at Freeport's facility began in late 2014, followed by trains 2 and 3 in early 2015. The trains will each have a production capacity of 4.6 million tons per year. Chicago Bridge & Iron Company NV (NSYE:CBI) (CB&I) (The Hague, Netherlands) is leading a team that includes Zachry Group (San Antonio, Texas) and Chiyoda Corporation (Yokohama, Japan) in engineering, procurement and construction (EPC). The projects have an estimated total investment value (TIV) of more than $15 billion. For more information, see Industrial Info's project reports on Train 1, Train 2 and Train 3. A fourth train remains under consideration, but would be some years off from beginning construction. For more information, see Industrial Info's project report.

Industrial Info will present a complimentary webinar on the spending outlook for the Oil & Gas Industry in the Americas on Tuesday, April 24, at 9 a.m. CDT (10 a.m. EDT). Among the topics to be discussed will be the potential for additional LNG infrastructure in the region, including where and why. Click here to RSVP.

The delay of the first train puts the U.S. in the No. 3 position behind Australia and Russia for liquefaction capacity reaching commercial startup in 2018. Earlier in the year, Dominion Energy Incorporated (NYSE:D) (Richmond, Virginia) started production at its Cove Point facility in Maryland, and this will be the only major LNG production facility to come online in the U.S. this year, although Industrial Info is tracking a few micro LNG facilities planned for startup.

Chris Easley, research manager for Oil & Gas at Industrial Info, said "Delays to projects of this size are not common, and what we are seeing is fallout from Hurricane Harvey [which hit Texas in late August]. Generally, by the time these projects kick off, the materials are in place and construction is ready to go. What we've generally seen with LNG projects is problems with permitting and funding at the early stages of project development."

Among the delayed projects mentioned by Easley were several LNG projects in British Columbia and the Jordan Cove project in Oregon, which was denied permitting by the U.S. Federal Energy Regulatory Commission (FERC) in 2016. Last year, Veresen Incorporated (TSX:VSN) (Calgary, Alberta), the owner of the project, resubmitted an application to FERC for the LNG facility and an accompanying supply pipeline. For more information, see Industrial Info's project reports on the LNG facility and accompanying pipeline and July 10, 2017, article - Veresen Shows Optimism for Jordan Cove LNG Project by Selecting EPC Contractor.

The delay of the startup of the first train of the Freeport facility means that 2019 is shaping up to be a big year for U.S. LNG. Among the projects planned to start production next year are those belonging to Sempra Energy (NYSE:SRE) (San Diego, California) and Cheniere Energy Incorporated (NYSE:LNG) (Houston). Sempra's facility will include three 5 million-metric-ton-per-year trains in Hackberry, Louisiana, at the site of a former regasification terminal. Construction began in 2014, with a consortium of CB&I and Chiyoda providing EPC on the project. For more information, see Industrial Info's project report.

Cheniere Energy until very recently was the sole LNG exporter in the U.S. The company is expanding its LNG footprint with construction of a new facility in Corpus Christi, Texas. Trains 1 and 2 at the facility are planned to kick off production next year. Each train will have a production capacity of 4.5 million tons per year. Construction began in 2015, with Bechtel Group Incorporated (San Francisco, California) providing EPC work. For more information, see Industrial Info's project reports on Train 1 and Train 2.

Also planned to start production next year is Kinder Morgan Incorporated's (NYSE:KMI) (Houston) Elba Island facility in Georgia, which also is being constructed on the site of a former regasification terminal. The facility will produce 2.5 million tons per year. Construction began early last year, with IHI Corporation (Tokyo, Japan) providing EPC on the project. Royal Dutch Shell plc (NYSE:RDS-A) (The Hague) will purchase 100% of the LNG produced at this plant. For more information, see Industrial Info's project report.

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