Elba Island LNG construction slated to begin 1 November

OREANDA-NEWS. October 20, 2016. Kinder Morgan will start construction on 1 November of its Elba Island LNG export project along the US Atlantic coast, the midstream company said today.

The export facility would be built at the site of the existing Elba Island LNG import terminal near Savannah, Georgia.

Kinder Morgan owns the import facility and would own all the equity in the export project, which has an estimated cost of \\$2.3bn. Of that amount, \\$2bn would be for the 10 small modular liquefaction trains and associated facilities and \\$300mn for pipeline infrastructure

Shell has a 20-year contract for all the planned baseload liquefaction capacity of 2.5mn t/yr, equivalent to 350mn cf/d (9.9mn m?/d) of gas, and peak capacity of 4mn t/yr. Shell also will provide the liquefaction units.

Elba Island would be the sixth LNG export project under construction in the US. But since Elba Island is smaller than the other facilities and would use modular technology built off-site, it could be the third US export project to come on line, after Sabine Pass LNG in Louisiana, which started exporting in February, and Cove Point in Maryland, which is due to start operating in late 2017.

If they are completed as planned, the six facilities would have combined peak capacity of 75mn t/yr, equivalent to 10.2 Bcf/d (289mn m?/d) of gas, nearing Qatari output of 77mn t/yr.

Kinder Morgan previously said that it expected Elba island to start exporting by late February 2018 and reach full production by November 2018 if construction began this summer. The company did not provide an updated timeline, but exports should start about mid-2018 based on that construction schedule.

Kinder Morgan said on an earnings call that it plans to start construction on 1 November even though the US Federal Energy Regulatory Commission (FERC) has not yet ruled whether to grant environmental group Sierra Club a rehearing over FERC's 1 June construction approval of the project.

Kinder Morgan said it consulted with Shell and both companies are confident FERC will uphold its approval of the project.

FERC on 17 October authorized Kinder Morgan to start initial site preparation but stressed that construction of export facilities would need separate approval after specified conditions are met. Kinder Morgan today asked FERC to authorize by 28 October on work related to barge dock construction and in-water pile driving, adding that one of the conditions of construction approval limits in-water pile driving and water dredging to 15 May-15 November.

Feed gas would come via the installation of additional southward transportation capacity along Kinder Morgan's 189-mile (304km) Elba Express pipeline, which extends northwest from the terminal to the Transcontinental pipeline along the Georgia-South Carolina border. It also connects with Southern Natural Gas in Georgia. The connections would allow gas to come from a number of producing basins, including the Marcellus shale formation centered in Pennsylvania.

FERC in June authorized Kinder Morgan to start adding north-to-south capacity on Elba Express so that some regional gas customers can start using their southbound capacity by late this year. Elba Express has signed seven precedent agreements with six shippers for 769mn cf/d of new southbound capacity, with about 70pc of that capacity contracted to Shell. The expansion would serve the liquefaction plant as well as regional demand.

The Elba Island export project is a prime candidate for Kinder Morgan's plans to form some limited partnership joint ventures, but Kinder Morgan said it does not need to form such a partnership for Elba Island to move forward because it is backed by a 20-year take-or-pay contract.