Freeport LNG Development has asked the US Federal Energy Regulatory Commission for a 26-month extension of the deadline to bring a fourth liquefaction train into service, well ahead of the May 2026 construction time limit.
Not registered?
Receive daily email alerts, subscriber notes & personalize your experience.
Register NowThe company needs certainty about its ability to meet its regulatory deadline in order to complete commercialization of the project, it told the commission in a May 16 filing (CP17-470).
The project, located at Freeport's existing terminal near Brazoria County, Texas, would add a fourth 5.1 million mt/year liquefaction unit, identical to the design of the first three trains, as well as a new pretreatment unit. It originally faced a May 17, 2023, deadline to complete work, but it received an extension from FERC in September 2020 to finish by May 17, 2026.
In its new request, Freeport asked FERC to act by Sept. 15 to extend the time period until Aug. 1, 2028.
Freeport asserted that when the original extension was granted in September 2020, it was not expected that the pandemic would last as long as it has or that impacts on global markets would be as significant.
"In this regard, the COVID-19 pandemic made it extremely difficult to secure long-term LNG commercial commitments given the far-reaching economic effects of the pandemic, and the uncertainty of future demand," it told the regulator. However, Freeport said, global demand for US LNG has rebounded, Freeport has been actively marketing the project and it anticipates being able to help fulfil US commitments to supply LNG to Europe.
Year-to-date, US LNG export demand has risen to nearly 12.6 Bcf/d, a roughly 4 Bcf/d , or 47% increase over the past two years, according to data from S&P Global Commodity Insights. Rising exports have also tracked higher global LNG prices, with the Platts JKM from S&P Global averaging nearly $30/MMBtu so far this year, a three-fold increase from the same period in 2021.
Platts DES Northwest Europe for July was assessed at $22.552/MMBtu on May 17, marking a day-on-day increase of $1.913/MMBtu, according to S&P Global data. Across the Atlantic, the Platts Gulf Coast Marker for US FOB cargoes loading 30 to 60 days forward was assessed at $21.250/MMBtu on May 17, up $1.860/MMBtu on the day.
Renewed pitch
Given the 48-56 months period to build Train 4, Freeport said it would not be possible to meet the current May 2026 in-service date for Train 4.
Asking FERC to provide the added certainty of an extension, it said the inability to meet the schedule is "impeding FLNG's efforts to finalize commercialization of the Train 4 Project and structure the complex financing associated with reaching a final investment decision, notwithstanding the significant upward trend in natural gas markets and US LNG demand."
CEO Michael Smith in March said he was hopeful Freeport would reach FID for the project in the first quarter of 2023.
As evidence of good faith efforts to complete the project, Freeport told FERC it had obtained all required permits and expended $100 million in capital to progress the development of the train. In addition, it said it had initiated a competitive bidding process in early May for engineering and construction companies, after KBR, the originally selected contractor, decided to exit the LNG engineering, procurement and construction contract business.
The request follows FERC's recent decisions to grant extensions to several LNG projects, despite protests from environmental groups. FERC May 6 gave the Corpus Christi Liquefaction Stage 3 project and Lake Charles LNG project additional time to complete work.
Then-commissioner Richard Glick, now chairman, had dissented on FERC's original order approving the fourth Freeport train in May 2019, on the ground that the commission had refused to consider the consequences of its actions on climate change. But his votes in favor of recent extensions could signal less friction for timeline decisions by the commission.