Lake Charles LNG seeks OK to export peak output

OREANDA-NEWS. September 15, 2016.  The delayed Lake Charles LNG export project in Louisiana is seeking to increase its export authorization to account for potential peak production.

The US Department of Energy (DOE) previously licensed the facility to export to all nations up to a gas equivalent of 2 Bcf/d (57mn m?/d), which the project developers said was equivalent to the planned baseload output of 15mn t/yr from three liquefaction trains.

US midstream company Energy Transfer has asked the DOE to increase the authorization by about 16.5pc, to a gas equivalent of 2.33 Bcf/d, to allow for the export of additional LNG produced under optimized conditions, known as peak production.

Energy Transfer owns the existing Lake Charles LNG import terminal and the export project. Energy Transfer has said peak production would total 16.45mn t/yr, only 9.7pc more than baseload production of 15mn t/yr. The company did not return an Argus call about the discrepancy in its reported peak production percentage increases between gas equivalents and liquid volumes.

Energy Transfer and Shell would make separate final investment decisions (FIDs) on the facility, as Shell earlier this year acquired long-term rights to all the planned liquefaction capacity through its buyout of BG.

The US Federal Energy Regulatory Commission in December authorized construction of the \\$10.9bn project, but Shell in July indefinitely delayed an FID because of low oil prices. Shell would assume all the commodity price risk by paying Energy Transfer a take-or-pay fee for liquefaction services. The economics of US LNG exports are based on a wide differential between domestic gas prices and global oil prices.

It is unclear if Shell will need the LNG from Lake Charles, as through its buyout of BG it also acquired 20-year contracts for up to 5.5mn t/yr of LNG from the Sabine Pass LNG terminal in Louisiana that came on line in February.

Shell also has a 20-year contract for all the planned capacity at Georgia's 2.5mn t/yr Elba Island LNG terminal scheduled to start construction this year and begin exporting in early 2018.

Energy Transfer is seeking a 25-year authorization to increase exports up to a gas equivalent of 2.33 Bcf/d to countries with free trade agreements (FTAs) with the US, and a 20-year license to countries that do not have such agreements.

The DOE has issued pending approval for additional Lake Charles FTA exports of 330mn cf/d, and is reviewing the non-FTA application. The agency must quickly approve FTA exports, but it must determine whether non-FTA exports are in the national interest before ruling on them.