February 23, 2023

WWW.ENERGYINTEL.COM

Cheniere Initiates Permitting for Major Sabine Expansion

Cheniere has initiated permitting with the US Federal Energy Regulatory Commission for a mammoth 20 million ton per year expansion of its existing Sabine Pass LNG export terminal in Louisiana to help meet what it sees as a growing global gas supply gap in the coming decade.

The largest US LNG exporter confirmed on Wednesday that it has initiated the pre-filing review process under the National Environmental Policy Act for the Sabine Pass Stage 5 Expansion Project, which it expects to produce first LNG by 2030.

“The need for further investment in LNG capacity was again laid bare last year,” Anatol Feygin, Cheniere’s chief commercial officer, said on a call with investors Thursday. “Over the next few decades, both the supply and demand side trends are supportive of new liquefaction infrastructure.”

The expansion project will be sited adjacent to the existing 30 million ton/yr Sabine plant and will consist of three 6.5 million ton/yr capacity liquefaction trains, a boil-off-gas re-liquefaction unit with a capacity to produce 0.75 million tons/yr of LNG and two 220,000 cubic meter capacity LNG storage tanks.

Cheniere is also looking to incorporate waste-heat recovery and carbon capture and storage at the expansion, which should help attract LNG buyers — many of which are looking to reduce their carbon emissions.

Running parallel to permitting, Cheniere has got the ball rolling on the engineering front, having engaged Bechtel to complete a Front-End Engineering and Design (FEED) study for the 20 million ton/yr project.

The Big Leagues

The Sabine expansion project was widely expected after Cheniere executives last year said the company was looking to add 30-plus million tons of liquefaction capacity across its Sabine Pass and Corpus Christi sites to give the company a liquefaction platform of 90 million tons/yr.

The land for expansion at Sabine Pass is "primed and ready to go, which is one of the advantages that we have as a brownfield site. The infrastructure is there at the facility. And there's a huge push and pull from the customer base worldwide,” Cheniere CEO Jack Fusco said during the company’s Q4 results call.

Confirmation of the expansion project at Sabine comes eight months after Cheniere announced a final investment decision on a 10 million ton/yr expansion project at its 15 million ton/yr capacity Corpus Christi facility, which will see seven mid-scale trains added at the Texas LNG plant.

Cheniere is also looking to add two more mid-scale trains at Corpus Christi, which would give the company a total liquefaction capacity of around 60 million tons/yr. A fourth stage expansion at Corpus Christi coupled with today’s announced expansion at Sabine will get Cheniere to the proposed 90 million tons.

Cheniere has concluded long term contracts for around 2.8 million tons/yr to support the proposed Trains 8 and 9 at Corpus Christi. The company expects to submit a full filing on the two trains by the end of the current quarter, Cheniere confirmed during its Q4 results presentation on Wednesday.

The company also provided an update on the current Stage 3 expansion at Corpus Christi, which Cheniere said was 24.5% complete as of Jan. 31.

Marketing efforts

Cheniere executives were quizzed by analysts about commercializing the Sabine expansion and were asked whether not having FERC approval will impact efforts to sell capacity.

Feygin suggested that the company will not be disadvantaged by marketing without the full FERC approval, highlighting marketing efforts for the stage 3 expansion of Corpus Christi which led to the additional 2.8 million tons/yr for the proposed Train 8 & 9 expansion.

Feygin also said he expects a mix of customers to underpin the Sabine expansion.

“So you are gonna see from the commercial side, [gas] producers, you’re gonna see European and Asian buyers."

Several US gas producers have started to look at US LNG projects in a bid to net better returns for their gas.

Record Exports

Cheniere exported a record 638 LNG cargoes last year, up from 566 in 2021. The company produced 44 million tons of LNG and 72% of it went to Europe, meaning Cheniere was Europe's main LNG supplier.

The record deliveries and elevated market prices supported Cheniere’s 2023 net income of $1.4 billion which was a marked increase from the $2.3 billion loss a year earlier.
Eric Thorp, London

Taipower Gets Green Light for Additional LNG Fueled Power

Taiwan's environmental regulator has approved two new 1,400-MW gas-fired units for a plant at the southern end of the LNG-dependent island.

State-owned Taipower has secured approval of an environmental impact assessment for the two combined cycle generating units to be added to its Dalin power plant in Kaohsiung City, the island's southernmost large city.

Pending official notification by Taiwan's Environmental Protection Administration, the approval should clear away the last major regulatory hurdles for the start of construction. Commercial power supply by both units could start as soon as electricity business licenses and other permits are approved, possibly before the end of 2027, Taipower said.

Taiwan was the world's sixth largest LNG importer last year, according to Kpler, having fallen from fourth position in 2021 as several European countries ratcheted up LNG imports in 2022. Nevertheless, Taiwan has seen a rising trend in imports for over a decade (see graph).

Created with Highcharts 9.0.0(million tons)TAIWAN'S LNG IMPORTSTaiwan2008200920102011201220132014201520162017201820192020202120220510152025Source: Kpler

Southern Taiwan in Transition

Taipower President Wang Yao-ting told regulators that the two new gas-fired units would be essential to meeting rising electricity demand in southern Taiwan.

Power is needed in the south by a number of major high technology investments, including by the Taiwan Semiconductor Manufacturing Company, as well as through digitalization of several existing industrial parks, and the extension of the Kaohsiung Rapid Transit System to neighboring Pingtung County.

Taiwan is very much in a power transition with the two new gas-fired units set to use 14 hectares at the site previously occupied by two 375-MW oil-fueled units which were retired in late 2017. The gas-fired units will also help compensate for the loss of two 951-MW nuclear reactors at Taipower's Maanshan power plant on Taiwan's southern tip, which are scheduled for retirement by May 2025.

Further tilting the power generation stack toward gas and LNG, three 1,300-MW gas-fired units will be coming on line soon at Taipower's Sinda power plant in Kaohsiung City and an 1,100-MW gas-fired unit at the Fengteh Power Plant. The latter plant is owned by Taiwan's Sun Ba Power, which is majority owned by Japan's Jera.

Wang added that Taipower is already investing in programs for co-firing of hydrogen and ammonia with LNG and coal as well as carbon capture and storage technology which "definitely" will be introduced at Dalin, when the technology is mature, to further reduce carbon emissions.

Financial Help for Taipower

Taipower's strained finances obtained a promise of some relief on Feb. 23 when Taiwan`s Executive Yuan (Cabinet) approved a NT$380 billion (US$12.5 billion) “special budget for post-pandemic economic and social resiliency” which included a NT$50 billion direct allocation to Taipower, which suffered a NT$267.5 billion deficit in 2022, in part due to absorbing a large share of the impact of rising LNG prices.

State-owned CPC passed on most of the hikes in global LNG prices to power companies, including Taipower and independent power producers, but did not hike natural gas rates to ordinary households or industry, suffering a NT$183.8 billion deficit last year.

During a post-Cabinet news conference, Vice Premier Cheng Wen-tsan stated that the NT$50 billion allocation in addition to a NT$150 billion increase in capitalization for Taipower approved last year “will help stabilize fuel and electricity prices within a reasonable range.”
Dennis Engbarth, Taipei

Gulfstream LNG Enters the US Liquefaction Race

Gulfstream LNG, a proposed 4 million ton per year export project in Louisiana's Plaquemines Parish, has asked the US Department of Energy for authorization to ship LNG to countries with which the US does and does not have free trade agreements (FTAs).

The application follows Gulfstream’s execution of a long-term lease agreement for a 500-acre site, which includes more than 0.8 miles of deepwater Mississippi River frontage located south of New Orleans.

The project is a second act for Vivek Chandra, CEO and Founder of Gulfstream LNG and formerly with Texas LNG, which is now being developed by the Glenfarne Group.

"We don’t have enough LNG," Chandra told Energy Intelligence, citing a global supply gap that US-based projects will need to fill. "The world will be short and the pipeline of projects is extra dry ... not many sites left."

First production from Gulfstream is expected in less than six years and "will coincide with a forecasted shortfall in global LNG supply exacerbated by recent geopolitical events and natural decline in many legacy facilities," his company said.

The plant is slated to have five mid-scale modular liquefaction trains with low-carbon emitting electric drives — a prevailing trend in the industry — with capacity of 800,000 tons per year of LNG apiece.

All commercial business models, including tolling by offtake customers and by upstream gas producers, as well as f.o.b. sales and co-production of ammonia, will be evaluated, the company said.

Chandra said he spent six months looking for a site and is now focused on recruiting potential equity investors.

His plan is to serve several LNG market segments from the same plant. With two ship berths — one for the large LNG tankers up to Q-Max size, and another for smaller bunkering ships with up to 10,000 cubic meters of capacity — the plant will serve international LNG markets as well as the regional bunker fuel market.

He also plans to co-produce ammonia and LNG and to flip back and forth between the two fuels as market conditions warrant.

Gulfstream expects FTA export approval later this year, and non-FTA approval once the company's Federal Energy Regulatory Commission (FERC) application has progressed. The company will ask FERC to begin the pre-filing process after completion of the current initial equity funding round.
Michael Sultan, Washington

Santos Braces for Lower Output After Setting Record

Santos could see its production fall as much as 13% in the coming year as the Australian independent awaits its next tranche of oil and gas from projects in Australia and Alaska.

Adelaide-based Santos set production guidance of 89 million to 96 million barrels of oil equivalent for 2023, down from the 103.2 MMboe it produced in 2022, which was a record for the company.

The drop is due to natural declines at the aging flagship Bayu Undan gas field in the Timor Sea and faltering flows at the Reindeer and Spar‑Halyard gas fields in Western Australia.

Santos has faced some headwinds as it seeks to advance important projects.

The company now expects its Dorado oil project offshore Australia to be ready for a final investment decision next year.

Dorado was put on hold in August because of inflation and supply chain concerns. It was initially due to be sanctioned in 2022.

To improve the economics of the project, Santos is rethinking its development plan. The company now plans to develops both oil and gas resources at the same time, rather than in a phased development that would have focused first on oil then gas.

The new plan will also incorporate resources from the nearby Pavo field, where Santos made a discovery last year.

Redo at Barossa

Santos has started consulting Tiwi Islands stakeholders in order to reapply for the drilling permit needed to advance the Barossa gas project, which is needed to backfill declining supplies from the Bayu-Undan field to the Darwin LNG plant.

Last year, an Australian court upheld a challenge led by an indigenous group against a drilling permit for the Barossa gas field.

In its ruling, the court found that traditional landowners were not properly consulted on the project and overturned approval of the permit by the National Offshore Petroleum Safety and Environmental Management Authority.

"That's going well at this stage," CEO Kevin Gallagher said this week. "We're progressing it, and progressing as fast and as hard as we can, but doing it as per the new guidelines."

The Barossa project is 55% complete.

Santos is planning to spend US$1.8 billion for the development of major projects in 2023, which will include work on Barossa as well as engineering to advance the 80,000 barrels per day Pikka oil project in Alaska, where it is partnered with Spain's Repsol.

Santos booked adjusted earnings of $2.1 billion and a record $3.6 billion in free cash flow in 2022.

The strong results were driven by higher commodity prices and record production following its acquisition of Papua New Guinea-based Oil Search.

Santos 2022 Earnings Results
($ million)20222021%Chg.
Total Revenue7,9874,83765%
Profit After Tax2,112658221
Sales Revenue (Incl. Third-Party)7,7904,71365
Sales Volume (MMboe)1121048
LNG Realized Price ($/MMBtu)15.59.368
Production (MMboe)10392.112%

Marc Roussot, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India11.5511.9211.6311.9011.2911.1512.2810.9012.2111.6511.0310.8111.10
Sodegaura, Japan12.4213.5313.5513.6012.409.6413.2411.5613.1313.8811.8011.1012.53
Zeebrugge, Belgium15.1013.7613.4613.8114.6814.9814.3813.4214.2613.4614.7914.0514.87
Huelva, Spain13.3312.0511.7612.1012.9112.7612.6311.6512.5311.7512.9712.1812.98
Isle of Grain, UK14.5213.1912.8913.2314.1314.4013.8912.8613.6912.8814.2213.4814.29
Everett, US5.243.944.233.994.984.870.014.614.433.645.41----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec9. Jan23. Jan6. Feb20. Feb020406080Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia14.7014.570.24-0.13
SW Europe13.6013.960.030.36
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.142.312.172.39
NBP, UK (futures)+0.1015.2115.1115.60
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF-0.2215.5615.7716.05
Zeebrugge (Belgium)----11.9912.27
German NCG0.0614.1614.1114.43
NBP (UK)0.0315.3015.2715.18
US Markets
US Spot Prices
Sabine Pass, Louisiana0.102.172.072.48
Corpus Christi, Texas2.042.040.002.30
Cove Point, Maryland0.392.321.932.24
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.142.312.172.39
Second Mth0.132.432.302.49
Third Mth0.152.592.442.64
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence