Cheniere eyes sanctioning new Texas LNG train next year
Cheniere Energy said it plans to make a positive investment decision next year on a planned third liquefaction train at the Corpus Christi LNG export terminal in Texas.
"I have a whiteboard in my office with a to-do list on it, and the only thing on that to-do list is to FID Corpus Christi train 3," Cheniere chief executive Jack Fusco said today on an earnings call. An FID refers to a final investment decision.
Cheniere is building two trains and associated facilities at Corpus Christi for $11bn. Each unit would have peak capacity of 5mn t/yr, equivalent to 694mn cf/d of gas, and baseload capacity of 4.5mn t/yr. The two-train project is 72pc complete and scheduled to start operating in 2019.
The Houston-based company has said it can build a similar-sized third train at a unit cost of $500-$600 per tonne of annual production, or about $2.25bn-$2.7bn for the baseload output. The third train would be cheaper by using existing infrastructure.
Cheniere signed some 20-year offtake deals for train 3 before oil prices dropped in mid-2014, but not enough to finance the unit. The company is negotiating with some large Asian utilities to sell more output from train 3, including potentially finalizing a preliminary agreement reached last week with China's state-owned CNPC.
Fusco said he is "guardedly optimistic" the CNPC agreement can be finalized early next year, but that deal is not necessary for Corpus Christi train 3 to move forward. Cheniere will soon ask the US Federal Energy Regulatory Commission for authorization to do some preliminary work for train 3 in anticipation of the investment decision, he added.
Six LNG export terminals are being built in the US that would have combined peak capacity of 73.5mn t/yr, including Cheniere's 25mn t/yr Sabine Pass LNG terminal in Louisiana. But it has been difficult for new US projects to sign customers since oil prices plummeted in mid-2014. The economics of US LNG exports are based on a wide differential between domestic gas prices and global oil prices, as most long-term Asian LNG contracts are linked to oil prices.
Cheniere is confident that it can secure more customers for Corpus Christi train 3 primarily because oil prices have started to climb, recently reaching the mid-$50s/barrel. Spot LNG prices and Asian demand have been higher than most analysts expected, but the spot market is not liquid enough to finance long-term deals, Fusco said.
"Our focus right now on Asia and CNPC is because it could be a real game-changer for the company as a whole," Fusco said. "So while we keep talking about Corpus 3, the demand forecast in Asia, and specifically in China, can double the size of our business. So we're happy taking smaller steps with Asian counterparties to get them comfortable with us and our ability. But the end goal for us is to radically transform our business."
Cheniere delivered six cargoes from Sabine Pass to Europe in the third quarter, but all of those went to premium southern European markets, indicating that buyers are willing to pay more than the netback price to northwestern European hubs, said Cheniere chief commercial officer Anatol Feygin.
Latin America and Asia received the majority of Sabine Pass shipments in the third quarter, and Mexico is expected to remain a strong market for Sabine Pass at least until the end of the year, Fegyin added.
Related news posts
FERC OK’s Virginia Transco gasline expansion
FERC OK’s Virginia Transco gasline expansion
New York, 1 May (Argus) — The US Federal Energy Regulatory Commission (FERC) today gave Williams the green light to expand natural gas capacity to Virginia by 101mn cf/d (2.9mn m3/d) on its Transco pipeline. The project, called the Commonwealth Energy Connector, involves the construction of 6.3 miles of new pipeline within Transco's existing right-of-way in southeast Virginia, near the border with North Carolina. The project also includes adding horsepower at compressor station 168, west of the new pipeline segment. Williams plans to begin construction this winter and put the project into service by the end of 2025. Environmental advocacy group Sierra Club opposed the project, arguing FERC failed to assess its potential greenhouse gas emissions, rendering its National Environmental Policy Act analysis moot. FERC disagreed, conceding that although the project's final Environmental Impact Statement demonstrated it would contribute to greenhouse gas emissions, the effects of those emissions on the environment could not be measured because FERC lacks the methodology to do so. The US south-Atlantic gas market has become more volatile in recent years as gas and power demand have soared, outpacing pipeline capacity expansions in the region. The combined gas consumption of Virginia and North and South Carolina in 2022 averaged 4.7 Bcf/d, up by 69pc from a decade earlier, US Energy Information Administration data show. Regional gas and power consumption is widely expected to continue climbing through the end of the decade on a massive build-out of data centers , especially in Virginia. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US gas industry pins hopes on AI power demand
US gas industry pins hopes on AI power demand
New York, 1 May (Argus) — US natural gas producers and pipelines have pivoted almost in unison this year to talking up what they see as one of the strongest bullish cases for gas this decade: surging electricity demand from yet-to-be-built data centers to power artificial intelligence software. EQT, the largest US gas producer by volume, in an investor presentation last week called growing data center demand the "cornerstone" to the "natural gas bull case." Combining its own research with data from the US Energy Information Administration, the gas giant forecast an increase in gas demand of 10 Bcf/d (283mn m3/d) by 2030 to generate electricity, mostly to run data centers. Its more aggressive data center build-out scenario envisions a whopping 18 Bcf/d increase in gas demand through 2030. Total US gas production is currently about 100 Bcf/d. Kinder Morgan, one of the largest US gas pipeline operators, this month forecast 20pc of US power being gobbled up by data centers in 2030, up from a 2.5pc share in 2022. Cobbling together projections from several consultancies and financial advisories, the company said the electricity needed to run artificial intelligence software alone will comprise 15pc of US power demand by 2030. If just 40pc of that demand is met by gas, that would represent an increase in gas demand of 7-10 Bcf/d, it said. This is roughly in line with the high end of US bank Tudor Pickering Holt's forecast for gas demand to power data centers through 2030 (1.3-8.5 Bcf/d) and well above Goldman Sachs' and consultancy Enverus' projections of 3.3 Bcf/d and 2 Bcf/d, respectively. New tech, old problems Separating the wide ranges of these projections is the highly speculative nature of forecasting demand years into the future for competing energy sources to power next-generation technology. But the major upside and downside risks, analysts say, concern the more humdrum challenges of permitting and building out energy infrastructure. Goldman Sachs expects 28GW, or 60pc, of the generation capacity needed to power new data centers through 2030 will come from natural gas — 9GW from combined cycle gas turbines and 19GW from gas peaker plants. But with an average lag of four years from the time a gas transmission project is announced to the time it enters service, to say nothing of the high probability of litigation being brought by environmentalists and landowners, construction and permitting timelines are "the most top of mind constraint for natural gas," the bank said. Indeed, litigation and opposition from state regulators have ultimately led developers to call off several interstate pipeline projects in the eastern US in recent years. The exception to the rule, Equitrans' 2 Bcf/d Mountain Valley Pipeline is moving forward only because congressional action allowed it to bypass federal permitting hurdles. This is a particular problem for the gas industry's hopes of exploiting the data center boom, as a large share of future data centers are slated to be built in the southeast US, far from the major US gas fields. New data centers representing 2 Bcf/d of gas demand in Georgia probably requires a new pipeline into the southeast, FactSet senior energy analyst Connor McLean said. Southeast premium A significant data-center buildout in the southeast without new pipelines could put upward pressure on regional gas prices, McLean said. This could exacerbate the effects of what has become perhaps the most prominent bullish case for US gas: a massive build-out of LNG export terminals along the US Gulf coast. With new export terminals pulling increasing volumes of gas south along the Transcontinental gas pipeline to super-chill and ship overseas in the coming years, the build-out in data centers will likely produce "an even bigger deficit in that southeast (gas) market," EQT chief financial officer Jeremy Knop told investors last week. "We think that market really, in time, becomes the most premium market in the country," he said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Milei's bid to open Argentina's economy passes
Milei's bid to open Argentina's economy passes
Montevideo, 30 April (Argus) — Argentina's congress today approved the government's sweeping economic legislation that could open the door to more private-sector investment in energy and commodities. The bill passed on a 142-106 vote, with five abstentions, after a marathon 20-hour debate. Changes include privatizing some state-owned companies, controversial labor reforms and measures to promote LNG development. The omnibus legislation, which includes 279 articles, is an important victory for President Javier Milei's administration and will change the way many sectors, including energy, operate in the country. Lawmakers aligned with Milei's Liberty Advances party swiftly moved to the second stage of the process, which requires approval of individual articles. The omnibus bill was initially approved in February, but the administration withdrew it after congress failed to approve several key individual articles. That original version included 664 articles. Several of the more controversial articles were brought up immediately after the blanket approval and easily passed. They included an article allowing for privatization of state-run enterprises — national power company Enarsa is on the list — and another delegating to the administration the power to eliminate state agencies without having to consult with congress. Also approved was the article on labor reform. The country's oilseed industry and port workers' unions called a strike the previous day to pressure congress to modify the labor reform. That did not happen. It passed in a separate 136-113 vote. The strike started to fizzle with approval of the legislation. Approval of the package includes several articles the administration says will open the door to major investments in the energy sector. Chapter II specifically covers natural gas, and introduces new regulations for LNG. The chapter includes five articles that allow for 30-year contracts for LNG export projects and guarantees that gas supply cannot be interrupted for any reason. The energy secretariat has six months to design the implementing rules for LNG. The government wants to speed up monetization of the Vaca Muerta unconventional play, which has an estimated 308 trillion cf of natural gas reserves. It is pushing for Malaysia's Petronas to fully commit to a large-scale LNG facility that would start with a $10bn investment. Chapter IX of the legislation creates a new framework, known as the Rigi, for investments above $200mn. It offers tax, fiscal and customs benefits. Companies have two years from implementation of the legislation to take advantage of the Rigi. The chapter on this framework is one of the most complex in the bill, including 56 articles. It includes specific references to energy projects, from power generation to unconventional oil and gas development. The administration claims the legislation will help tame inflation and stabilize the economy. Inflation was 276pc annualized through February, but is declining, and Milei announced that monthly inflation would be in single digits when the March numbers are announced. The country recorded a 0.2pc quarterly fiscal surplus in the first quarter of this year, something not achieved since 2008. By Lucien Chauvin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
G7 countries put timeframe on 'unabated' coal phase-out
G7 countries put timeframe on 'unabated' coal phase-out
London, 30 April (Argus) — G7 countries today committed to phasing out "unabated coal power generation" by 2035 — putting a timeframe on a coal phase-out for the first time. The communique, from a meeting of G7 climate, energy and environment ministers in Turin, northern Italy, represents "an historic agreement" on coal, Canadian environment minister Steven Guilbeault said. Although most G7 nations have set a deadline for phasing out coal-fired power, the agreement marks a step forward for Japan in particular, which had previously not made the commitment, and is a "milestone moment", senior policy advisor at think-tank E3G Katrine Petersen said. The G7 countries are Italy — this year's host — Canada, France, Germany, Japan, the UK and the US. The EU is a non-enumerated member. But the pledge contains a caveat in its reference to "unabated" coal-fired power — suggesting that abatement technologies such as carbon capture and storage could justify its use, while some of the wording around a deadline is less clear. The communique sets a timeframe of "the first half of [the] 2030s or in a timeline consistent with keeping a limit of 1.5°C temperature rise within reach, in line with countries' net-zero pathways". OECD countries should end coal use by 2030 and the rest of the world by 2040, in order to align with the global warming limit of 1.5°C above pre-industrial levels set out in the Paris Agreement, according to research institute Climate Analytics. The countries welcomed the outcomes of the UN Cop 28 climate summit , pledging to "accelerate the phase out of unabated fossil fuels so as to achieve net zero in energy systems by 2050". It backed the Cop 28 goal to triple renewable energy capacity by 2030 and added support for a global target for energy storage in the power sector of 1.5TW by 2030. The group committed to submit climate plans — known as nationally determined contributions (NDCs) — with "the highest possible ambition" from late this year or in early 2025. And it also called on the IEA to "provide recommendations" next year on how to implement a transition away from fossil fuels. The G7 also reiterated its commitment to a "fully or predominantly decarbonised power sector by 2035" — first made in May 2022 and highlighted roles for carbon management, carbon markets, hydrogen and biofuels. Simon Stiell, head of UN climate body the UNFCCC, urged the G7 and G20 countries to lead on climate action, in a recent speech . The group noted in today's outcome that "further actions from all countries, especially major economies, are required". The communique broadly reaffirmed existing positions on climate finance, although any concrete steps are not likely to be taken ahead of Cop 29 in November. The group underlined its pledge to end "inefficient fossil fuel subsidies" by 2025 or earlier, but added a new promise to "promote a common definition" of the term, which is likely to increase countries' accountability. The group will report on its progress towards ending those subsidies next year, it added. Fostering energy security The communique placed a strong focus on the need for "diverse, resilient, and responsible energy technology supply chains, including manufacturing and critical minerals". It noted the important of "guarding against possible weaponisation of economic dependencies on critical minerals and critical raw materials" — many of which are mined and processed outside the G7 group. Energy security held sway on the group's take on natural gas. It reiterated its stance that gas investments "can be appropriate… if implemented in a manner consistent with our climate objectives" and noted that increased LNG deliveries could play a key role. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more