Gulf Coast LNG Ramps Up as Freeport LNG Signs Second 20-Year Purchase Agreement

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Researched by Industrial Info Resources (Sugar Land, Texas)--On Monday, Freeport LNG Expansion LP (Houston, Texas) announced that the company had entered into a 20-year liquefaction tolling agreement (LTA) with BP Energy Company (NYSE:BP) (Houston, Texas). Under the agreement, BP will purchase 4.4 million tons per year of liquefied natural gas (LNG) from Freeport LNG's planned liquefaction and export plant on Quintana Island, near Freeport, Texas.

The planned facility will replace Freeport LNG's existing LNG receiving and regasification terminal, which began operating in 2008--just in time for the shale gas revolution to make all imports of LNG to the U.S. commercially unviable. As with other planned facilities, such as Cheniere Energy's (NYSE:LNG) (Houston) uncompleted import terminal in Corpus Christi, Texas, the plan is now to convert the facility to a liquefaction plant in order to liquefy and export the abundance of natural gas being produced from U.S. shale plays.

Freeport LNG plans to build up to four liquefaction trains at the facility. The company is awaiting approvals from the Federal Energy Regulatory Commission (FERC) to commence construction and the U.S. Department of Energy (DoE) for approval to export to non-Free Trade Agreement (non-FTA) countries. The company expects to receive FERC approval in the third quarter of this year, and is next in the queue to receive non-FTA export approval from the DOE. The response period for initial comments on the DoE application ends February 25.

To date, Cheniere Energy is the only company to receive permission from the DoE to export LNG to non-FTA countries. The company is under way with construction at its Sabine Pass plant in Louisiana and awaiting similar permission before commencing construction at its Corpus Christi facility.

In July 2012, Freeport LNG signed 20-year LTAs with Japanese companies Osaka Gas Company and Chubu Electric for a total of 4.4 million tons of LNG per year, representing the full capacity of the plant's first LNG train. Japan remains a growing market for LNG as the country phases out nuclear power in the wake of the Fukushima nuclear disaster. BP's agreement would encompass the full production of Freeport LNG's second liquefaction train.

In a company press release, Michael S. Smith, CEO of Freeport LNG, said: "With the first two liquefaction trains of the project fully contracted, we intend to approach the financing markets imminently so that we can begin construction on the initial two-train facility as soon as we receive FERC approval." Construction of the Freeport LNG facility is expected to begin later this year and be completed in four to five years.

As construction of these multibillion-dollar LNG trains begins escalating in the Gulf Coast region, one of the consequences will be a sharp increase in the demand for skilled craft labor in the area. For additional information, see February 6, 2013, article - Gulf Coast Mega-Projects to Increase Demand for Skilled Craft Labor. In addition, construction of oil sands projects in Alberta and other planned LNG export facilities along the Pacific Coast of North America could significantly affect the costs and distribution of skilled craftsmen throughout North America.

Industrial Info's tools to track this changing labor market include the Five-Year Labor Supply & Demand Outlook, the Manpower Market Analyzer, and the Gulf Coast Region Labor Market Analysis, which provide detailed labor information for metropolitan areas throughout North America. More information can be obtained by contacting Tony Salemme, the vice president for Industrial Info's Craft Labor Group, at tsalemme@industrialinfo.com or by calling (209) 547-9878.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.