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Louisiana’s Magnolia LNG gets OK to start site work

09 May 2017 19:34 (+01:00 GMT)
Louisiana's Magnolia LNG gets OK to start site work

Houston, 9 May (Argus) — The US Federal Energy Regulatory Commission has authorized the Magnolia LNG project to begin site preparation at its planned location in the Port of Lake Charles, Louisiana.

It is not clear when, or if, Magnolia will be built because it has not signed adequate long-term customer deals necessary to finance the $4.5bn project.

Magnolia "remains fully engaged" in trying to finalize LNG offtake agreements to allow a positive investment decision, said Greg Vesey, chief executive of Australia's Liquefied Natural Gas Limited, which owns Magnolia and the proposed Bear Head LNG export terminal in eastern Canada.

Magnolia has been fully permitted to build four equal-sized liquefaction trains and associated facilities with combined capacity of 8mn t/yr, equivalent to 1.08 Bcf/d (31mn m³/d) of gas.

The project has said it is confident it will make an investment decision this year or next to allow it to come on line in the early 2020s, when the current global LNG supply glut is expected to recede.

Magnolia has said it needs to finalize liquefaction capacity contracts for at least 6mn t/yr to get financing, but so far it has signed only one binding deal for 2mn t/yr with the UK's Meridian LNG.

Lower oil prices since mid-2014 have made it difficult for US LNG export projects to secure customers, as the economics of US LNG exports are based on a wide differential between domestic gas prices and global oil prices. Most long-term Asian LNG contracts are linked to oil prices.

Dozens of LNG export projects have been proposed in the contiguous US, but only six are being built as they signed long-term capacity deals with customers before oil prices fell. Those projects have combined peak capacity of 73.5mn t/yr, almost equaling Qatari capacity of 77mn t/yr.