Three US LNG export projects today announced preliminary deals to cooperate with South Korea's state-owned Korea Gas (Kogas), on the same day that South Korean President Moon Jae-in met US President Donald Trump in Washington, DC.
The non-binding deals were reached with San Diego-based Sempra and Australia's Woodside for their proposed Port Arthur LNG export project in Texas; with Dallas-based Energy Transfer and Shell for their planned Lake Charles LNG terminal in Louisiana; and with the Alaska Gasline Development Corporation (AGDC) for its planned massive Alaska LNG project in that state.
Sempra, Woodside and the AGDC said Kogas could be a potential LNG customer and equity partner in their respective projects. Energy Transfer said Kogas could be a potential customer but did not mention equity. All three projects also said Kogas could partner in other areas, including gas sourcing and construction.
It is unclear if any of those multi-billion-dollar projects will be built because of the current oversupplied global LNG market and low oil prices, as the economics of US LNG exports are based on a wide differential between global oil prices and domestic gas prices. The Port Arthur and Alaska projects have not signed any long-term deals to allow financing. Shell would be the primary customer of Lake Charles, but it has put that project on hold. Shell has significant US LNG capacity from Cheniere Energy's Sabine Pass terminal in Louisiana, which started exporting last year, and Kinder Morgan's Elba Island LNG export project in Georgia, scheduled to come on line next year.
In addition, Kogas may have already overbought US LNG, as this month it started a 20-year deal for up to 3.5mn t/yr of LNG, equivalent to about 483mn cf/d (13.7mn m³/d) of gas, from Sabine Pass. Kogas in 2014 signed a 20-year deal to sell 700,000t of those supplies to France's Total at Henry-Hub linked prices, indicating it would not need all that US LNG for domestic consumption.
But Kogas may need to significantly increase its LNG consumption as Moon plans to reduce reliance on nuclear and coal-fired generation. According to state-controlled energy think tank KEEI, LNG will account for 56.4pc of South Korea's installed generation capacity in 2029, up from 32.2pc last year.
Kogas may also be looking to acquire more capacity from Cheniere, which has been permitted to expand Sabine Pass and the Corpus Christi LNG terminal it is building in Texas. Earlier this week Cheniere chief executive Jack Fusco said during a meeting with Kogas chief executive Seung-Hoon Lee, "We hope to continue to grow this relationship between Kogas and Cheniere."
Sempra is building the Cameron LNG export terminal in Louisiana that is scheduled to come on line next year.
The 13.5mn t/yr Port Arthur project is scheduled to start operating in 2023. Is unclear when the 15mn t/yr Lake Charles project would come on line, as Shell has delayed making a positive investment decision. The US Department of Energy today increased Lake Charles' export authorization to any country by 0.33 Bcf/d, from the previously approved 2 Bcf/d, to account for potential peak production.
The AGDC this year took sole ownership of the $40bn-$45bn, 20mn t/yr Alaska LNG project after former partners ExxonMobil, BP and ConocoPhillips withdrew because of concerns over economics. The project is scheduled to come on line in 2024, but AGDC has said it would need equity partners.
"AGDC gains the opportunity to move Alaska LNG forward with an internationally recognized natural gas infrastructure company," said AGDC president Keith Meyer. "Kogas gains the prospect of investing in Alaska LNG as well as participating in all aspects of project development and financing."
