The US Department of Energy (DOE) today authorized Golden Pass Products to export up to 15.6mn t/yr of LNG, equivalent to 2.21 Bcf/d (63mn m³/d) of gas, for up to 20 years to countries that do not have free trade agreements (FTAs) with the US.
Golden Pass, which would be located near Port Arthur, Texas, is better positioned than many other proposed US LNG export projects. It is owned by major LNG traders QP (70pc) and ExxonMobil (30pc) and would be built at the site of the existing Golden Pass LNG import terminal, significantly reducing infrastructure costs.
Saad Sherida Al-Kaabi, chief executive of Qatar's state-owned QP, said the non-FTA license "paves the way" toward a 2018 positive investment decision for the $10bn project. Golden Pass, which previously said it would consider an investment decision after completing permitting this year, did not reply to an Argus inquiry.
A 2018 investment decision likely would mean the earliest date that exports could start is 2022, one year later than previously announced.
It is unclear if the project will be built because it would need to sell most of its planned capacity under long-term, take-or-pay contracts, and so far it has not reached any such deals. Low oil prices since mid-2014 and an oversupplied market have made it difficult for US LNG projects to sign customers, as the economics of US exports are based on a wide differential between global oil prices and domestic gas prices. Most long-term Asian LNG contracts are linked to oil prices.
Many industry observers expect a "second wave" of US LNG export projects will come on line in the early to mid-2020s, when the supply glut likely will recede. Six LNG export terminals are being built in the contiguous US with combined peak capacity of 73.5mn t/yr, almost equaling Qatari capacity of 77mn t/yr.
The DOE has now authorized non-FTA LNG exports equivalent to 19.2 Bcf/d of gas and FTA exports equivalent to 54.7 Bcf/d. The agency must quickly approve FTA exports because they are presumed to be in the national interest. The DOE must determine if non-FTA exports are in the US interest before approving them, but the agency has so far not rejected any non-FTA applications for that reason.
The DOE has relied on a 2015 study it commissioned that concluded LNG exports in the range of 12-20 Bcf/d would benefit the domestic economy. The agency has not announced plans to commission another study before approving non-FTA exports of more than 20 Bcf/d. It did not reply to an Argus inquiry today.
US energy secretary Rick Perry said today's decision "is another example of President Trump's leadership in making the United States an energy dominant force."
Charlie Riedl, executive director of the Washington, DC-based Center for Liquefied Natural Gas industry group, said the Trump administration clearly supports the US LNG industry and he is not aware of plans to commission a new study.
"We're hopeful we will see more approvals soon," he said.
Golden Pass in December received construction authorization from the US Federal Energy Regulatory Commission and in 2012 the DOE issued it a license to export up to 2 Bcf/d to FTA nations. The DOE said the non-FTA license was for a higher volume because the agency uses a different factor to convert tonnes LNG to gas volumes than Golden Pass uses.
