Page 6 - NorthAmOil Week 32 2021

NorthAmOil COMMENTARY NorthAmOil
US LNG players flag up current trends
US LNG producers discussed various gas market trends that are driving their plans during their second-quarter earnings calls recently
US
WHAT:
US LNG producers are prioritising their most economic projects as they consider where to build new liquefaction capacity.
WHY:
Brownfield expansions continue to enjoy relative cost advantages.
WHAT NEXT:
Rising LNG demand and prices could spur the next wave of US LNG capacity to move forward.
US LNG producers highlighted various trends and how those trends are driving their deci- sion-making in recent second-quarter earn- ings calls. The companies were discussing their results against the backdrop of strong LNG prices and a growing appetite among buyers to sign new offtake agreements.
Sempra Energy warned in its second-quarter conference call that higher construction costs for greenfield liquefaction projects continued to pose a challenge. Meanwhile, fellow US LNG exporter Cheniere Energy highlighted the return of long-term LNG contracts in support of the construction of new liquefaction capacity.
This illustrates the challenges and oppor- tunities for US LNG players as they consider whether to issue final investment decisions (FIDs) on a second wave of liquefaction capac- ity, centred on the Gulf Coast. And brownfield projects may find themselves at more of an advantage as these companies decide what to build next.
Cost pressures
“It does go back to this issue ... that greenfield projects, which tend to have a little bit of a higher per-unit cost than brownfield projects, this will continue to put pressure on that dichotomy,” Sempra’s chairman and CEO, Jeffrey Martin, said in response to an analyst question about the
economics of new North American LNG pro- jects compared with the rest of the world. “But keep in mind that all the other projects in the world are subject to those same cost pressures,” he added.
Indeed, Sempra recently pushed plans for its greenfield Port Arthur LNG project in Texas onto the back burner, opting to prioritise a fourth train at the existing Cameron LNG ter- minal in Louisiana instead.
“The key for greenfield projects like Port Arthur is it’s much more advantageous to do that project at multiple phases at scale, which makes it increasingly more economic,” Martin said. “But right now, bringing online Train 4 at Cameron is a top priority,” he continued, adding that doing this while debottlenecking the first three Cameron trains “really adds to its cost advantage”.
The benefits of debottlenecking can be illus- trated by Cheniere, which said earlier this year that the process and maintenance optimisation had added at least 7mn tonnes per year (tpy) of LNG to the company’s portfolio. Other US LNG producers’ portfolios are smaller than that of Cheniere, but could also benefit from similar debottlenecking efforts.
Martin also noted that at the same time as the cost pressures around construction were being seen, LNG spot prices were also rising. And
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w w w . N E W S B A S E . c o m Week 32 12•August•2021