Who wins from US LNG export approval shake up?

As Cheniere completes marketing Corpus Christi LNG trains and remains firmly on track to be the first L48 greenfield US LNG export project, we look at the projects which stand to benefit most from the new proposed approval process for export licenses - and those which may lose out.

The three train, 13.5 mmtpa Corpus Christi LNG project is firmly on track to be the first Lower 48 greenfield US LNG export project, with FERC and DOE approvals expected by Q1 2015. Wood Mackenzie expects a final investment decision (FID) to be taken by early-2015 and LNG production could begin as early as 2018.

First greenfield US Gulf Coast LNG project on target for FID [Subscription required] 

In June, the US Department of Energy (DOE) issued a proposal to change the approval process for LNG export licenses which will affect the order in which new projects are granted approval.

Currently, LNG exports to countries which have a free-trade agreement (FTA) with the US must be approved quickly whilst the DOE has to decide whether exports elsewhere are in the public interest.

However, for the last two years the DOE has been granting conditional non-FTA export licences, dependent on the successful completion of the review required by the Federal Energy Regulatory Commission (FERC).

So far, only 2.2bcfd of Sabine Pass capacity has received approval and a final non-FTA export license. However the 9.3 bcfd of combined firm and conditional non-FTA export licenses has turned into a high-profile and politically contentious issue.

Under the proposal, the DOE wants to assess licenses after they have successfully completed the FERC review. This could benefit projects that are later in the DOE queue but further along in the FERC process, such as Sabine Pass trains 5-6 and Golden Pass, by moving ahead of projects that have a conditional export license.  

As a result we have re-ordered the projects based on the potential timing of their FERC authorisation date.

It's evident that the proposed rules could reset the level of non-FTA exports approved to only 2.2 bcfd – Cheniere's four trains at Sabine Pass which are under construction.  However, the US could still reach 12 bcfd of FERC-approved project capacity by H2 2015.

If non-FTA export approvals are limited by the DOE, the new rules should allocate approved capacity to more commercially viable projects as the cost of a full FERC submission – over US $100 million – is far greater than a DOE export license application.

Under these rules, we expect the Freeport, Cameron, Cove Point, Corpus Christi and Southern LNG export projects to all take FID by H1 2015 which, combined with Sabine Pass, will provide close to 60 mmtpa of LNG export capacity.

In contrast, we believe that some projects with substantial execution hurdles or limited commercial traction may stall further investment or seek partnerships.

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New US LNG export approval rules - who benefits? [Subscription required]

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