Freeport LNG Terminal

From Global Energy Monitor
This article is part of the Global Fossil Infrastructure Tracker, a project of Global Energy Monitor.
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Freeport LNG is an LNG import terminal in Freeport, Texas. New LNG trains for export are under construction at the terminal.

Location

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Export Project Details, Trains 1-3

  • Owner: Freeport LNG Development[1]
  • Parent: Zachary Hastings, Osaka Gas, Dow Chemical Company, Global Infrastructure Partners, Freeport LNG[1]
  • Location: Freeport, Texas, United States
  • Coordinates: 28.932003, -95.317355 (exact)[2]
  • Capacity: 15.3 mtpa (5.1 mtpa per train)[1]
  • Status: Operating[3]
  • Type: Export
  • Trains: 3[1]
  • Financing: Initial project financing in 2014 from Japan Bank for International Cooperation (UD$2.6 billion) and from various Japanese commercial banks and Dutch bank ING (US$1.67 billion), with the private financing portion insured by Nippon Export and Investment Insurance (NEXI)[4]
  • Start Year: 2019[1]

Note: mtpa = million tonnes per year; bcfd = billion cubic feet per day

Export Project Expansion Details, Train 4

  • Owner: Freeport LNG Development[1]
  • Parent: Zachary Hastings, Osaka Gas, Dow Chemical Company, Global Infrastructure Partners, Freeport LNG[1]
  • Location: Freeport, Texas, United States
  • Coordinates: 28.932003, -95.317355 (exact)[2]
  • Capacity: 5.1 mtpa[5]
  • Status: Proposed, Pre-FID[6]
  • Type: Export
  • Trains: 1
  • Financing: US$1 billion loan from Westbourne Capital[7]
  • Start Year: 2026[8]

Note: mtpa = million tonnes per year; bcfd = billion cubic feet per day

Import Project Details

  • Owner: Freeport LNG Development[1]
  • Parent: Zachary Hastings, Osaka Gas, Dow Chemical Company, Global Infrastructure Partners, Freeport LNG[1]
  • Location: Freeport, Texas, United States
  • Coordinates: 28.932003, -95.317355 (exact)[2]
  • Capacity: 13.2 mtpa[9]
  • Status: Unknown
  • Type: Import
  • Start Year: 2008

Note: mtpa = million tonnes per year; bcfd = billion cubic feet per day

Background

Freeport LNG Development, L.P. designed, built and operates the Freeport LNG import terminal in Freeport, Texas. ConocoPhillips bought two-thirds of the capacity of Freeport LNG and Dow Chemical the remaining third. Construction began in 2005 and was completed in 2008.[10]

After the US fracking boom, Freeport LNG filed two DOE applications, each for 511 Bcf/year in December 2010 and 2011, and received approval from DOE to export LNG to Free Trade Agreement countries in February 2011 and 2012. In December 2010, Freeport LNG also submitted a pre-filing request with FERC to begin the environmental review of the liquefaction project. The project would transition the import terminal into an export terminal.[10]

Freeport LNG intends to file its formal application pursuant to Section 3 of the Natural Gas Act (NGA) by August 2012 and will request that FERC authorize by 2013. Freeport LNG anticipates a construction schedule of approximately three to four years, beginning in early 2017.[10]

On May 17, 2013, the DOE gave the green light to Freeport LNG Expansion and FLNG Liquefaction’s proposal to send 1.4 billion cubic feet per day of natural gas overseas for 25 years, allowing export to nations that do not have a free-trade agreement with the U.S. The decision came less than 24 hours after the Senate confirmed Energy Secretary Ernest Moniz, author of a 2011 MIT report on natural gas that advocated its export.[11]

Construction of the export terminal started in late 2014. The first three production trains will add approximately 15 million metric tonnes per year (mtpa) of nominal liquefaction capacity to the Quintana Island terminal facilities. An additional LNG train (Train 4) is under development.[12] As of February 2019, construction for the export terminal was ongoing, and pre-commissioning had begun for Train 1.[13] By February of 2020, Freeport LNG had begun shipping cargoes, suggesting that the export terminal is operational.[3]

As of February 2020, the commissioning of Train 4 wasn't expected until 2024.[14] In April 2020, the energy and shipping brokerage Poten & Partners disclosed that the final investment decision (FID) for Train 4 had been delayed beyond the original FID timing of 2020. It cited COVID-19, plunging demand and the crash in oil prices as the reasons for the delay. [15] In May 2020, Train 3 commenced commercial operations marking the full commercial operation of the three-train facility.[16]

In August 2020, Reuters reported that Freeport LNG had asked FERC for an additional three years until May 2026 to complete Train 4. According to a Freeport spokesperson, "Given the current market conditions resulting from COVID-19, Freeport LNG does not expect to reach FID on Train 4 this year, we can be ready to start construction by mid-2021, if market conditions improve."[8]

Supply contracting for Train 4 initially saw a preliminary agreement signed in 2018 by Japan's Sumitomo for the purchase of 2.2 million mt/year of LNG from Train 4. This agreement expired without being finalized. In March 2021, Freeport LNG CEO Michael Smith said that the company had recently seen renewed interest from buyers in long-term contracts tied to Train 4, but did not provide details about these potential buyers.[17]

In June 2021, Smith made further optimistic comments about ongoing sales contract discussions with potential buyers which could be finalised by the end of the year. The company would be able to reach FID for Train 4 by summer 2022 if it gets at least 75% of the liquefaction train's approximate 5 million mt/year capacity sold to the commodity traders, utilities, and other end-users that Freeport LNG has been talking to. Smith also hit out at European buyers who would be unlikely to agree to further sales agreements, saying, "[Europe] is a tough market to crack because they are so ESG bonkers and there's a lot of governments that don't want US shale gas, I think, even if you do carbon sequestration for some of them."[18]

In mid-September 2021, a power outage caused by Tropical Storm Nicholas led to all three liquefaction trains at the plant going offline.[19] The timing of the terminal's startup remained unclear as of September 17.[20]

Financing

In April 2015 Freeport LNG secured the final piece of financing for its $12.5 billion liquefied natural gas export terminal, placing the company on track to begin producing by early 2018 and fully operational by 2019.[21] Since the initial project finance support, Trains 1 to 4 have been supported via multiple bond issues and refinancing deals running into several billion dollars which have been provided and facilitated by a wide range of international commercial banks, most commonly the Japanese banks Mitsubishi UFJ Financial Group, Mizuho and Sumitomo Mitsui Banking Corporation.

In September 2019, Freeport LNG secured a loan of approximately US$1 billion from Westbourne Capital, an Australian investment manager, to cover the cost of Train 4 construction.[7]

Articles and resources

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 2020 World LNG Report, page 102, International Gas Union, April 27, 2020
  2. 2.0 2.1 2.2 "Contact & Media | Contact Us and Locations | Freeport LNG". freeportlng.com. Retrieved 2021-01-13.
  3. 3.0 3.1 U.S. weekly LNG exports for third week running LNG World News, February 21, 2020.
  4. Project Financing for Freeport LNG Project in U.S., Japan Bank for International Cooperation press release, Oct. 30, 2014
  5. Freeport LNG’s Train 1 start-up delayed LNG World News, April 20, 2018.
  6. U.S. Liquefaction Capacity, Energy Information Administration, November 3, 2020
  7. 7.0 7.1 Harry Weber, Freeport LNG sees loan deal as lift to Train 4 expansion prospects, S&P Global, Sep. 9, 2019
  8. 8.0 8.1 Scott DiSavino, Freeport seeks more time to build Train 4 at LNG export plant in Texas, Reuters, Aug. 3, 2020
  9. The LNG Industry: Annual Report 2020, page 48, International Group of Liquefied Natural Gas Importers, accessed April 29, 2020
  10. 10.0 10.1 10.2 "Freeport LNG Export project," Freeport LNG Development, accessed April 2012.
  11. Zack Colman, "DOE gives green light to controversial natural gas export project," The Hill, May 17, 2013.
  12. Freeport LNG: Taking U.S. Natural Gas Global Freeport LNG, accessed July 16, 2019.
  13. From Land to Liquefaction: Pre-commissioning is here The Isle Magazine, February 2019.
  14. US hopes for robust second wave of LNG supply could dim: Freeport LNG’s Smith Hellenic Shipping News, February 14, 2020
  15. John Snyder FID's delayed by global uncertainty, Riviera Maritime Media, Apr. 24, 2020
  16. Freeport LNG starts Train 3 operations, Riviera Maritime Media, May 6, 2020
  17. Harry Weber, Corey Paul, CERAWEEK: Buyers said to renew interest in supplies from Freeport LNG Train 4, S&P Global, Mar. 3, 2021
  18. Harry Weber, Freeport LNG optimistic it could get support for Train 4 by end of year: CEO, S&P Global, Jun. 29, 2021
  19. Scott DiSavino, Freeport's Texas LNG export plant still offline after Storm Nicholas, Reuters, Sep. 15, 2021
  20. Harry Weber, Freeport LNG sets initial steps to resume service after hurricane struck Texas, S&P Global, Sep. 17, 2021
  21. "Massive Freeport LNG project chugs forward with $12.5 billion in its back pocket" Fuel Fix, Rhiannon Meyers, April 28, 2015.

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