Page 7 - NorthAmOil Week 32 2021

NorthAmOil COMMENTARY NorthAmOil
this is a trend he expects US LNG exporters to benefit from as demand for the fuel continues to grow.
Cheniere executives, meanwhile, said they were close to considering an FID on the Stage III expansion at Corpus Christi LNG in Texas. Additionally, the company recently signed a gas supply agreement with Canada’s Tourmaline Oil that would support the expansion. This was the third integrated production marketing (IPM) agreement in support of Corpus Christi Stage III, according to Cheniere’s president and CEO, Jack Fusco.
“Stage III enjoys brownfield project econom- ics as it will utilise a significant amount of shared infrastructure constructed as part of Trains 1 through 3, which we believe make Stage III a very cost-competitive LNG capacity addition,” Fusco said. Like Martin’s comments, Fusco’s illustrate the focus on new brownfield expan- sions among existing US LNG producers.
However, Fusco also said that his company was “staying extremely financially disciplined” on its next expansion project to ensure the expansion’s risk and return profile would be consistent with Cheniere’s existing trains.
The company’s existing 45mn tonne portfolio is around 90% contracted and it will try to main- tain it in the 80-90% range even with an FID on the expansion. This would require around 4mn tpy of additional contracted capacity to under- pin all of Stage III, according to Cheniere’s sen- ior vice president and chief financial officer, Zach Davis.
The company has various investment param- eters it needs to ensure are met to ensure any new capacity is value- and credit accretive and represents the best use of the company’s cash, Davis said. With that in mind, he said Cheniere was “pretty confident” that 2022 could be a big year for the company.
What next?
Cheniere is also among those more confident about the growing appetite for its output, based on Fusco’s comments on the company’s earnings call, as well as in its second-quarter release.
“Global LNG market fundamentals continue to be extremely constructive, and we have begun to see the return of long-term LNG contracts in support of the construction of new liquefaction capacity,” Fusco said on the call.
In the company’s second-quarter release, meanwhile, he noted that Cheniere’s outlook for the remainder of the year had improved again, amid higher LNG prices and increased produc- tion expectations.
Cheniere is not the only one to be seeing an increased appetite for long-term contracts. Tellurian, which is currently moving towards a final investment decision (FID) on the Drift- wood LNG project in Louisiana, signed three new offtake agreements in the second quarter of this year, covering nearly all of the capacity from the project’s first phase.
In an investor presentation days after the release of its second-quarter earnings, Tellurian said it was in talks with banking groups about financing Driftwood. The company reaffirmed its intention to reach an FID on Driftwood in the first quarter of 2022, after overhauling its plans for the project and opting for a smaller first phase of 11mn tpy.
Driftwood is a greenfield project, making it stand out among brownfield developments that may reach FID in the short or medium term. It illustrates that moving forward with greenfield developments is also still possible – if potentially more challenging. However, the evolution of Tellurian’s model for Drift- wood shows that it may help for developers to approach their projects with a degree of flexi- bility and adapt to new circumstances.™
Like Martin’s comments, Fusco’s illustrate the focus on new brownfield expansions among existing US LNG producers.
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