The start of US LNG exports this year marks 2016 as a watershed year for the industry, but many projects are delayed
OREANDA-NEWS. The start of US LNG exports this year marks 2016 as a watershed year for the industry, but many projects are delayed because of continued low oil prices and an oversupplied global market.
The first train at Cheniere Energy's Sabine Pass LNG terminal in Louisiana exported its first cargo on 24 February and has been loading about one cargo a week. Cheniere is building five liquefaction trains at Sabine Pass, each with baseload capacity of 4.5mn t/yr, equivalent to about 620mn cf/d (17.5mn m?/d) of gas, and peak capacity of 5mn t/yr.
The second liquefaction train at Sabine Pass is scheduled to export its first test cargo this month and start long-term operations in late September, although those timelines could be delayed by a planned maintenance shutdown in September or October.
The economics of US LNG exports are based on a wide differential between domestic gas prices and global oil prices, while proposed western Canadian LNG export would be indexed to oil prices. The slump in oil prices over the past two years has put many projects in doubt.
At the beginning of the year, at least 16 North American LNG export projects were targeting FIDs, with tne were in the US and six in Canada. Of those, only Georgia's 2.5mn t/yr Elba Island project is moving forward. Construction is expected to start this summer, which could make the facility the sixth LNG export terminal under construction in the contiguous US. Elba Island is owned by Kinder Morgan and Shell has a 20-year contract for all the capacity.
If the six projects are completed as planned they would have combined peak capacity of 75mn t/yr, nearing Qatari output of 77mn t/yr. Those projects signed long-term capacity deals before oil prices plummeted in mid-2014, and customers could lose money if oil prices do not rise.
But with changed market dynamics, Shell recently indefinitely delayed final investment decisions (FIDs) for the proposed 15mn t/yr Lake Charles LNG facility in Louisiana and the 26mn t/yr LNG Canada project in British Columbia (BC).