Golden Pass LNG export permit move seen as silver-bullet challenge for US regulators

Tuesday, 06 November 2012

The content of the ExxonMobil-Qatar Petroleum application contains such compelling supporting evidence and analysis that its rejection would cast a cloud over a future US LNG export industry, analysts said.

The two companies, who are partners in the world's largest LNG production complex in Qatar, have applied to the DoE through their affiliate, Golden Pass Products LLC, for authorisation to export 740 billion cubic feet equivalent per year of domestically-produced LNG over a 25-year period to nations without a Free Trade Agreement with the US.

So far, only Cheniere Energy has received permission to export LNG to Non-FTA nations, though Cheniere and others have permits to export to FTA nations.

About 14 companies have now received permits to export to FTA nations, but 15 other applications, mostly from the same companies, are marked as "Under DoE Review" as regards exporting to the Non-FTA nations and the largest LNG consumers.

"Golden Pass Products is proposing to add export capabilities to its affiliated world-class LNG import terminal in Jefferson County, Texas.

"To engage in the proposed exports, Golden Pass Products will seek authorization from the Federal Energy Regulatory Commission (FERC) to construct, site and operate the Golden Pass Products Export Terminal," the application stated.

For a Non-FTA LNG export permit, companies must offer mitigation in terms of the effects on the US natural gas market

Golden Pass submitted that potential domestic natural price effects due to Golden Pass Products LNG exports, or cumulative US LNG exports, "can be considered modest" through 2035, as shown in previous studies.

"US producers currently have access to abundant domestic natural gas that can be developed cost-effectively to supply both domestic and incremental LNG export opportunities.

"Second, since LNG export ventures are long-term, commercially complex, technically demanding, and capital-intensive endeavors, only a limited number of projects will likely reach completion," Golden Pass said.

"The recent history of US LNG import terminals underscores the degree of challenge. In that instance, fewer than one in four projects that applied ultimately reached completion.

"Lastly, competition for international markets will serve to balance the collective growth of US LNG export developments, further moderating domestic market implications," Golden Pass stated.

The application also pointed to the experience of ExxonMobil and Qatar Petroleum in the global LNG market.

"Over the past 20 years, QP and ExxonMobil have funded billions of dollars of investments in LNG projects, providing a significant contribution to the world's new liquefaction capacity.

"In complement to proven execution and operational capabilities, QP and ExxonMobil have a track record of applying technological innovation to deliver successful projects and develop competitive energy supplies, including pioneering advances in liquefaction and LNG ship design.

"Technical achievements include building the first 3.3 MTPA, 4.7 MTPA and 7.8 MTPA liquefaction trains and larger, more cost-effective Q-Flex and Q-Max LNG carriers.

"Further underpinning the qualifications are the unparalleled financial strength and discipline to realize long-term, world-scale endeavors. Additionally, ExxonMobil is the leading producer of natural gas and has the largest proven gas reserves in the United States," the application stated.