US DOE grants third non-FTA approval to Lake Charles LNG
The 15mtpa Lake Charles LNG export proposal has received its non-free trade agreement (non-FTA) approval from the US Department of Energy (DOE) on 7 August, the third such approval in a backlog of pending project applications.
The 25-year conditional approval for 15mtpa grants the Lake Charles Exports subsidiary authorisation to trade to countries that do not have FTA status with the US, which includes major key importers such as China and Japan.
The joint developers of the Lake Charles project are Texas-based Energy Transfer Equity (ETE), parent owner of Southern Union Co and LNG project company Trunkline LNG, and UK-listed oil and gas company BG Group.
The brownfield LNG import terminal aims to flip to liquefaction, with a three-train facility estimated for onstream production by the end of this decade, according to BG Group.
"This remains subject to final investment decision (FID) by both ETE and BG Group, and Federal Energy Regulatory Commission (FERC) approval," said a BG Group spokesman.
Trunkline LNG, in a March 2013 FERC filing, plans to commence operation of the facilities by August 2018.
The third DOE approval − which comes 12 weeks after the last approval of the Freeport LNG project and more than a year after the first Sabine Pass green light - maintains the order of an established queue of project applications that have been sorted by applications filed with sister agency FERC.
DOE received Lake Charles LNG's request to sell to FTA and non-FTA countries in May 2011. The venture received FTA approval, which was required to be granted without delay in July that year.
During the 2011 second-quarter earnings presentation before the approval was granted, BG Group's CEO Chris Finlayson said the company expects the ruling "very soon", but still saw the DOE go-ahead as a first step.
"Once you have the DOE ruling, you have a tremendous amount of work, maybe somewhere between $100m and $200m worth of pre-FEED (preliminary front-end engineering and design) and FEED work to allow your FERC application, the environmental application, to be processed and approved," Finlayson said. "And that will take somewhere between one and two years. So we're on track."
"And it's important to remember, as I say, that this is the first stage of the process and that companies − not just ourselves, but others who are proposing these types of projects − will need to invest a significant amount of money before their proposal is finally approved through the FERC ruling," Finlayson added.
Lake Charles began its pre-filing review under FERC in April 2012. The regulatory approval from FERC, which includes environmental siting and review, is estimated to last about 18 months.
In 2012, ETE completed the merger of Southern Union, bringing along the developing plans of Lake Charles within the fold.
Sources with knowledge of the US LNG projects said the acquisition had slowed down some of the engineering work on Lake Charles LNG in order to meet BG Group's standards.
In January this year, Trunkline LNG filed for regulatory approval from the DOE to seek exports from non-FTA countries, indicating a marketing fissure between the British supplier, which is not investing equity into the project, and the project developer. Trunkline requested its own authorisation to export 15mtpa of Lake Charles LNG exports.
Next projects for approval
After Lake Charles, the Cove Point scheme in Maryland, which is developed by utility Dominion Resources, is next in line for consideration. The 5.5mpta project has committed 2.3mpta of its capacity to India's GAIL and 2.2mpta to Japanese trading company Sumitomo. Sumitomo's customers, in turn, are Tokyo Gas and Kansai Electric Power with 1.4mtpa and 800,000 tonnes respectively.
A Dominion spokesman said non-FTA approval is expected by the end of this year. Cove Point's FERC application is expected to be approved by the first quarter of 2014.
The DOE also will then consider an application for Freeport LNG's expansion capacity to underpin its third train, followed by
Sempra LNG's Cameron project in Louisiana. Sempra's executives stated that DOE approval is expected by this year end. The 12mpta Cameron LNG facility, which has capacity offtakers in France-based GDF SUEZ and Japan's Mitsubishi and Mitsui, is also advancing on its project financing efforts. Firm commitments from lenders are expected by the end of this year, according to Sempra's CEO Debra Reed during its second-quarter earnings results presentation on 6 August.
However, the DOE's timeline to advance the approvals would have to be expedited. Freeport LNG, which received its non-FTA license on 17 May, waited nearly 18 months since the Sabine decision. An estimate of an eight-week scenario between the next applications would place Cove Point to be granted its application by early October, with the Freeport expansion to be approved by late November.
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