Texas LNG awards contracts to Samsung, KBR

The mid-size Texas LNG export project has awarded a venture of South Korea's Samsung Engineering and US-based KBR contracts to conduct detailed engineering and then build the facility if an investment decision is made.

Samsung, which became a minority partner in the project in June 2014, completed a preliminary engineering study last year, Samsung chief marketing officer Jae Hoon Choi said. Detailed engineering, which would provide a precise construction cost and allow permitting to be completed, is scheduled to begin this year.

Texas LNG would be located near Brownsville, Texas. It would get much of its gas from the nearby prolific Eagle Ford shale gas field by procuring capacity on a pipeline that would be built by a third party.

Texas LNG plans to make a final investment decision in 2018 and come on line in 2021 or 2022 with one liquefaction train, with capacity of 2mn t/yr, equivalent to 267mn cf/d (7.6mn m³/d) of gas. A second phase, which would double capacity to 4mn t/yr, would be built if there is enough demand.

An investment decision for each phase would only be made if enough binding take-or-pay deals are reached to finance the respective phase. The project in January signed non-binding 20-year agreements with four unnamed state-owned and private LNG buyers in southeast Asia and China for a combined volume of 3.1mn t/yr.

Since the steep fall in oil prices since mid-2014, it has become 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 Asian LNG contracts are linked to oil prices.

Texas LNG is among dozens of projects vying to be part of an expected second wave of LNG export projects that would come on line in the early 2020s, when the current global supply glut is expected to recede. Texas LNG hopes to attract customers by offering relatively low liquefaction fees of $2.80/mmBtu, 20pc less than the fees of $3.50/mmBtu that Cheniere Energy secured for the Corpus Christi LNG export terminal it is building in Texas.

Texas LNG in March 2016 applied for construction authorization from the US Federal Energy Regulatory Commission (FERC), a process than cost up to $150mn to complete for complex LNG projects.

The US Department of Energy (DOE) has authorized Texas LNG to export up to 4mn t/yr to countries that have free trade agreements (FTAs). The agency will consider Texas LNG's application to export the same volume to non-FTA nations if FERC issues environmental clearance.