The six liquefaction “trains” under development at Cheniere Energy’s Sabine Pass liquefied natural gas (LNG) terminal will demand nearly 4 Bcf/d of natural gas on average, the first 650 MMcf/d of that starting within a few months. And the five trains now planned at Cheniere’s Corpus Christi site—yes, now five, not three—will require another 3.2 Bcf/d. Taken together, that’s about 10% of current daily gas production in the U.S.; in other words, a monumental logistical task. Today, we start a series looking at the challenges of securing and moving huge volumes of gas to LNG export terminals, the emerging epicenters of U.S. gas demand.
The development of the initial quartet of LNG export facilities on the Gulf Coast and East Coast continues. Construction of the first project out of the gate—Train 1 at Cheniere’s Sabine Pass terminal in Cameron Parish, LA—is nearing completion, with initial LNG production likely by the end of 2015 and the first shipments in early 2016. Meanwhile, work on three other trains at Sabine is well along (they’ll start operating in 2016-17), and Cheniere is closing in on final investment decisions (FIDs) on two more trains at the same site (for a total of six). A few miles to the east, Cameron LNG is building three liquefaction trains in Hackberry, LA, and in Freeport, TX Freeport LNG is building two trains of its own. On the East Coast, Dominion is building a one-train liquefaction plant at Cove Point, MD. All four projects have something big going for them—namely, each is at the site of an existing LNG import terminal (developed before the shale era), so a lot of the docking and other infrastructure is already in place. That’s given what we’ve been calling these “First Four” LNG export projects a capital-cost edge that, in turn, has enabled them to offer attractively low liquefaction tolling fees and to reach long-term deals with a long list of international off-takers.
Despite uncertainty about what the rapidly evolving international LNG market may mean for future U.S. export projects (see the Is That All There Is? and A Whole New World series for more on that), Cheniere—a gutsy pioneer in the LNG-export business—remains decidedly upbeat. In mid-May (2015), the company gave its contractor the go-ahead to start building two liquefaction trains at a site in Corpus Christi; the final investment decision—on a third train is expected later this year). Corpus will be the first “greenfield” LNG export project in the Lower 48 states (a small LNG export terminal near Kenai, AK came online in 1969 and is still operating). And on June 10 (2015), Cheniere announced that it hopes to build two more trains at Corpus and—as if that weren’t enough—that it’s partnering with Parallax Enterprises on two somewhat smaller LNG export projects in Louisiana. Cheniere estimates that each of the now 11 trains planned at Sabine and Corpus will demand 650 MMcf/d of natural gas, or a total of more than 7.1 Bcf/d. (The two projects the company’s working on with Parallax will each have two trains just over half the size of those at Sabine and Corpus; the Parallax projects’ gas needs would likely total about 1.4 Bcf/d.) Not all of Cheniere’s planned liquefaction capacity may get built, but most of it clearly will. As we said, four trains are under construction at Sabine (with online dates between late 2015 and late 2017), two are getting under way at Corpus, and FIDs for two more trains at Sabine and one at Corpus are likely soon.
The unsung heroes in these vast undertakings include the folks who plan for the procurement and transportation of all that gas—billions of cubic feet every day. It’s not an easy task. Given that Sabine will be the first to liquefy gas and export LNG from the lower 48, let’s look at what Cheniere’s been doing to line up the gas and the pipeline capacity it will need. Up front, we should note that the services the company will be providing under the sales and purchase agreements (SPAs) that it has reached with off-takers include procuring the natural gas, liquefying it and loading it on LNG vessels. We’ll get to gas procurement in a bit—suffice it to say for now that all LNG exporters are looking for diversity in the supply basins their gas will be coming from. Getting gas to Sabine (or any of the other export terminals being built) involves lining up firm pipeline capacity for those last miles to the terminal as well as for the long hauls from producing regions to the terminal’s general area. Four Sabine-area pipelines are under contract to deliver the gas needed for all six planned Sabine trains those last miles to the terminal; Figure 1 provides a helpful big picture.